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Presentation By: Naoyuki Shinohara Deputy Managing DirectorInternational Monetary FundAsian Institute of ManagementManila, November 4, 2011
Citation preview
The Asia-Pacific Economic Outlook and Policy Challenges in an Uncertain Global Environment
Naoyuki Shinohara
Deputy Managing Director
International Monetary Fund
Asian Institute of Management
Manila, November 4, 2011 1
Plan of the Presentation
1. Advanced Economies: Outlook and Risks
2. Emerging Asia: Outlook, Risks, and
Policies
3. The Philippines: Short and Long Term
Challenges
2
Advanced Economies
Outlook and Risks
3
In advanced economies, adverse feedback loops
between fiscal and financial vulnerabilities remain a
key concern
4Note: Current refers to data as of October 28.
Global Outlook
Bank CDS spreads(5-year, basis points)
Sovereign CDS spreads(5-year, basis points)
0
100
200
300
400
500
600
Euro area United States
Lehman Current
0
100
200
300
400
500
600
700
Euro area United States
Lehman Current
In the U.S., household balance sheet are still repairing
Global Outlook
U.S. House Price Indices(January 2006 =100)
U.S. Household Net Worth(Percent of disposable personal income;
business cycle peak = 100)
5
65
70
75
80
85
90
95
100
105
2006 2007 2008 2009 2010 2011
Case-Shiller 20-city index
CoreLogic (incl. distressed)
CoreLogic (excl. distressed)
Case-Shiller national index (2006Q1=100)
70
75
80
85
90
95
100
105
110
0 1 2 3 4 5 6 7 8 9
10
11
12
13
14
Current episode
Range of previous
recessions, 1953-2001
World U.S.
Euro
Area Japan Brazil Russia India China
2011
(Sep 2011)4.0 1.5 1.6 -0.5 3.8 4.3 7.8 9.5
2011
(Apr 2011)4.4 2.8 1.6 1.4 4.5 4.8 8.2 9.6
2012
(Sep 2011)4.0 1.8 1.1 2.3 3.6 4.1 7.5 9.0
2012
(Apr 2011)4.5 2.9 1.8 2.1 4.1 4.5 7.8 9.5
WEO Real GDP Growth Projections (percent change from a year earlier)
Global growth has been revised down
Global Outlook
6
Risks to the global economy are tilted to the
downside
7
Risks to the Global Outlook(Baseline forecast and selected confidence bands)
Global Outlook
-2
-1
0
1
2
3
4
5
6
7
2007 2008 2009 2010 2011 2012
90 percent confidence interval 70 percent confidence interval
50 percent confidence interval
90 percent confidence interval (April 2011)
Central forecast
Emerging Asia
Outlook, Risks and Policies
8
Financial turbulence in advanced economies
has spilled over to Asia and activity is moderating
9
EM Asia Outlook and Risks
Stock Indices(Percent change;
as of October 31, 2011)
Exchange Rate against U.S. Dollar(Percent change, increase = depreciation;
as of October 31, 2011)
Selected Asia: Manufacturing PMI(Seasonally adjusted; 50=neutral)
-60
-50
-40
-30
-20
-10
0
10
Th
ail
an
d
Ho
ng
Ko
ng
SA
RK
ore
aS
ing
ap
ore
Ja
pa
nIn
do
ne
sia
Ch
ina
Ph
ilip
pin
es
Au
str
ali
aM
ala
ysia
Ind
iaN
ew
Ze
ala
nd
Vie
tna
m
Em
erg
ing
Eu
rop
eE
uro
are
aU
nit
ed
Sta
tes
La
tin
Am
eri
ca
Change since August 1
Largest 2-month change since January 2008
Ta
iwa
n P
rov
ince
of
Ch
ina
-10
0
10
20
30
40
50
Ch
ina
Ho
ng
Ko
ng
SA
RJap
an
Ph
ilip
pin
es
Vie
tnam
Th
ailan
d
Mala
ysia
Au
str
alia
Sin
gap
ore
In
do
nesia
Ko
rea
New
Zeala
nd
In
dia
Eu
roR
ussia
Bra
zil
Mex
ico
Po
lan
dH
un
gary
Change since August 1
Largest 2-month change since January 2008
Ta
iwa
n P
rov
ince
of
Ch
ina
40
42
44
46
48
50
52
54
56
58
60
Au
str
ali
a
Ho
ng
Ko
ng
SA
R
Ko
rea
Sin
ga
po
re
Ja
pa
n
Ind
ia
Ne
w Z
ea
lan
d
Ch
ina
end-2010 Aug-11 Latest
Taiw
an
Pro
vin
ce o
f C
hin
a
Note: latest data refer to October 2011, except for Hong Kong SAR and New Zealand (September 2011).
Growth forecast have been revised down slightly,
but risks tilted decidedly to the downside
10
Asia: GDP Growth(Central forecast and selected confidence
intervals; in percent)
Asia: Projected GDP Growth(in percent; year over year)
Actual data and latest projections
Difference from April
2011
2010 2011 2012 2011 2012
Industrial Asia 3.7 0.0 2.5 -1.7 0.2
Australia 2.7 1.8 3.3 -1.2 -0.2
Japan 4.0 -0.5 2.3 -1.9 0.2
New Zealand 1.7 2.0 3.8 1.1 -0.3
Emerging Asia 9.5 7.9 7.7 -0.2 -0.3
China 10.3 9.5 9.0 -0.1 -0.5
Hong Kong SAR 7.0 6.0 4.3 0.6 0.1
Korea 6.2 4.0 4.4 -0.5 0.2
Taiwan Province of China 10.9 5.2 5.0 -0.2 -0.2
India 10.1 7.8 7.5 -0.4 -0.3
Indonesia 6.1 6.4 6.3 0.2 -0.2
Malaysia 7.2 5.2 5.1 -0.3 -0.1
Philippines 7.6 4.7 4.9 -0.3 -0.1
Singapore 14.5 5.3 4.3 0.1 -0.1
Thailand 7.8 3.5 4.8 -0.4 0.3
Vietnam 6.8 5.8 6.3 -0.5 -0.5
Asia 8.3 6.3 6.7 -0.5 -0.2
EM Asia Outlook and Risks
0
1
2
3
4
5
6
7
8
9
10
2007 2008 2009 2010 2011 2012
90 percent confidence interval
70 percent confidence interval
50 percent confidence interval
Central forecast
Another global recession:
Would hit emerging Asia hard through the trade channel…
11
Selected Asia: Contribution of Non-Asian Final Demand to Value Added
(In percent of GDP)
Export-Oriented Asia: Private Domestic Demand and Exports
(Year over year percent change)
Note: Includes China, Hong Kong SAR, Japan, Korea, Malaysia, the Philippines, Taiwan Province of China, and Thailand.
EM Asia Outlook and Risks
0
10
20
30
40
50
60
Sin
gap
ore
Mala
ysia
Th
ail
an
d
Ph
ilip
pin
es
Ko
rea
Ind
on
esia
Ch
ina
1995-2000 2001-2010
OECD average(2005)
Taiw
an
Pro
vin
ce
of
Ch
ina
-60-50-40-30-20-1001020304050
-12-10
-8-6-4-202468
10
20
00
:Q1
20
02
:Q1
20
04
:Q1
20
06
:Q1
20
08
:Q1
20
10
:Q1
20
11
:Q2
Private domestic demand (left scale)
Exports of goods (right scale)
… and the financial channel
12
Selected Asia: Foreign Holdings in Local Currency Government Bonds
(In percent of total outstanding local currency government bond)
Consolidated Claims of European and U.S. Banks on Selected Asia
(In percent of GDP; as of 2011:Q2)
Note: Claims are on immediate borrower basis. Uses sum of quarterly GDP in U.S. dollar between 2010:Q3 and 2011:Q2 in the denominator.
EM Asia Outlook and Risks
0
5
10
15
20
25
30
35
40
20
00
:Q1
20
01
:Q1
20
02
:Q1
20
03
:Q1
20
04
:Q1
20
05
:Q1
20
06
:Q1
20
07
:Q1
20
08
:Q1
20
09
:Q1
20
10
:Q1
20
11
:Q3
Indonesia Korea Malaysia Thailand
0
5
10
15
20
25
Mala
ysia
Au
str
ali
a
Ko
rea
New
Zeala
nd
Ph
ilip
pin
es
Ind
ia
Jap
an
Th
ail
an
d
Ind
on
esia
Ch
ina
Other European banks
U.K. banks
Euro area (excl. France) banks
French banks
U.S. banks
Taiw
an
Pro
vin
ce
of C
hin
a
Downside risks may warrant a pause in monetary tightening
Fiscal normalization should be allowed to stay the course
13
Emerging Asia: Overheating Index and Vulnerability to
a Slowdown in G2 Growth
Policies
Asia: Cyclically Adjusted Fiscal Balances in 2012
(Deviation from 2002-07 average, percent of GDP)
IDN
CHN
IND
PHL
KORMYS
THA
TWN
SGP
0.0
0.5
1.0
1.5
2.0
2.5
0.00 1.00 2.00
Ove
rhe
ati
ng
ind
ex
(20
11
:Q2
)
Change (in percentage point) inGDP growth following a
slowdown in growth in G–2 by 1 percentage point
Note: Responses to a slowdown in G–2 growth are based on regression estimates, and include effects of
discretionary policy measures.
Incre
asin
go
ve
rhe
ati
ng
p
ressu
re
Increasing vulnerabilityto slowdown in G–2
-4
-3
-2
-1
0
1
2
New
Zeala
nd
Sin
gap
ore
Au
str
ali
a
Th
ail
an
d
Jap
an
Ind
on
esia
Mala
ysia
Ind
ia
Ho
ng
Ko
ng
SA
R
Ch
ina
Ph
ilip
pin
es
Ko
rea
Ta
iwa
n P
rovin
ce
of
Ch
ina
Exchange rates:
room for further appreciation
14
Selected Asia: REER(index, 2007=100)
FX Reserves to Short Term Debt(end of 2010, in remaining maturity basis)
Policies
40
60
80
100
120
140
160
Jan
-90
Jan
-91
Jan
-92
Jan
-93
Jan
-94
Jan
-95
Jan
-96
Jan
-97
Jan
-98
Jan
-99
Jan
-00
Jan
-01
Jan
-02
Jan
-03
Jan
-04
Jan
-05
Jan
-06
Jan
-07
Jan
-08
Jan
-09
Jan
-10
Jan
-11
Korea Indonesia Philippines
Thailand China
Se
p-1
1
ASEAN includes Indonesia, Malaysia, the Philippines, Thailand, and Vietnam.
0
200
400
600
800
1000
AS
EA
N
Ind
ia
Ch
ina
EM
Lati
n
Am
eri
ca
East
Asia
(e
xcl.
Ch
ina)
EM
Easte
rn
Eu
rop
e
What if there is another global crisis/recession?
Asia has ample room to respond:
Draw on abundant FX reserves or regional reserve
pooling arrangements
Shift aggressively to ease monetary policy
Reverse fiscal consolidation (for those with fiscal
space)
Guarantees bank liabilities
Deploy extraordinary measures (such as expansion
of central bank balance sheets or exceptional liquidity
provision) should rates approach the zero bound
15
Policies
Advancing rebalancing would reduce the vulnerability to
external shocks, and help make growth more inclusive
16
Global Current Account Balances(in percent of world GDP)
Policies
-4 -2 0 2 4 6 8 10 12
CEE
Lat AM
MENA
SSA
ASEAN
NIEs
Industrial Asia
South Asia
Other Asia
Population-weighted average
Simple Average
EMs: Change in Gini Index, Last Two Decades(In Gini points, since 1990)
-3
-2
-1
0
1
2
3
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Rest of the world Emerging AsiaJapan and Germany Oil exportersChina United States
Global discrepancy
Projections
The Philippines: Short and Long
Term Challenges
17
Philippines: Growth has slowed,
but inflation has remained elevated
18
Philippines: Contributions to Growth
(In percentage points; y/y)
Headline CPI Inflation
(In percent; y/y)
Private Credit Growth
(In percent; y/y)
The Philippines
18
-15
-10
-5
0
5
10
15
20
20
08
Q1
20
08
Q2
20
08
Q3
20
08
Q4
20
09
Q1
20
09
Q2
20
09
Q3
20
09
Q4
20
10
Q1
20
10
Q2
20
10
Q3
20
10
Q4
20
11
Q1
20
11
Q2
Private consumptionPublic consumptionFixed investmentChange in stocksNet exports
-4
-2
0
2
4
6
8
10
12
14
Ma
r-0
7Ju
n-0
7S
ep
-07
De
c-0
7M
ar-
08
Ju
n-0
8S
ep
-08
De
c-0
8M
ar-
09
Ju
n-0
9S
ep
-09
De
c-0
9M
ar-
10
Ju
n-1
0S
ep
-10
De
c-1
0M
ar-
11
Ju
n-1
1S
ep
-11
Indonesia Malaysia
Philippines Thailand
0
5
10
15
20
25
30
35
40
Ma
r-0
7Ju
n-0
7S
ep
-07
De
c-0
7M
ar-
08
Ju
n-0
8S
ep
-08
De
c-0
8M
ar-
09
Ju
n-0
9S
ep
-09
De
c-0
9M
ar-
10
Ju
n-1
0S
ep
-10
De
c-1
0M
ar-
11
Ju
n-1
1S
ep
-11
Indonesia Malaysia
Philippines Thailand
In the Philippines, poverty reduction remains a key issue
The Philippine Development Plan focuses on inclusive growth
Key measures for inclusive
growth in the Philippine
Development Plan:
Infrastructure investment
Governance reform
Investment in education and
health
Supporting the poor
19
Selected Asia: Change in Poverty Headcount(In percentage points, since 1990;
at 2005 PPP prices)
-75 -50 -25 0 25
Vietnam (2008, 13.1/38.5)
China (2005, 15.9/36.3)
Indonesia (2009, 18.7/50.6)
Lao P.D.R. (2008, 33.9/66.0)
Cambodia (2007, 28.3/56.5)
Nepal (2004. 55.1/77.6)
India (2005, 41.6/75.6)
Philippines (2006, 22.6/45.0)
Sri Lanka (2007, 7.0/29.1)
Thailand (2009, 10.8/26.5)
Bangladesh (2005, 49.6/81.3)
Malaysia (2009, 0.0/2.3)
Mongolia (2005, 22.4/49.1)
At $2 per day At $1.25 per day
The Philippines
As in other ASEAN economies, strengthening sustainable growth in
the Philippines will involve more infrastructure spending
20
Infrastructure GapEffect of Infrastructure on Private
Investment Spending(In percent of GDP: increase associated with one
percent increase in infrastructure)
0
20
40
60
80
100
120
140
160
180
200
0
10
20
30
40
50
60
19
95
20
05
Late
st
19
95
20
05
Late
st
ASEANOther Emerging MarketsNon-Asia Advanced Economies
Phones per 1,000 people(LHS)
Electricity generation (billion kilowatt hours per capita, RHS)
0.0
0.5
1.0
1.5
2.0
2.5
Ele
ctr
icit
y
Tele
ph
on
es
Cell
ph
on
es
The Philippines
Summing up
Advanced Economies:
Outlook and Risks
Emerging Asia: Outlook,
Risks, and Policies
The Philippines: Short and
Long Term Challenges
• Risks of adverse feedback loops from fiscal
and financial fragilities persist
• G2 growth has slowed
• Risks tilted to the downside
•Healthy growth thanks to strong domestic
demand
• But downside risks dominate—does this call
for a pause in tightening?
•Advancing rebalancing demand is key, and
will also lead to more inclusive growth
•Resilient growth and inflation elevated
•Over the medium term, need to make growth
more inclusive and increase infrastructure
21
Conclusions
Asia is still expected to continue growing at a solid rate in 2011
and 2012. But downside risks from a weakening global economy
have greatly intensified.
Persistent weakness in advanced economies underscores the
importance of shifting the growth model in Asia.
This means advancing the policies needed for rebalancing and
maintaining flexible exchange rates. This would help shift the
engines for growth toward domestic demand and make growth
more inclusive.
In the near term, Asia should pause monetary tightening in those
countries where there is room, to allow time for greater clarity on
the prospects for the advanced economies. But fiscal consolidation
should be allowed to run its course, and Asia has still room to
respond if downside risks materialize.22
THANK YOU.
23