Information about Asia and the Pacific Asia y el Pacífico
Front Matter

Front Matter

International Monetary Fund. Asia and Pacific Dept
Published Date:
April 2012
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    Information about Asia and the Pacific Asia y el Pacífico
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    © 2012 International Monetary Fund

    Cataloging-in-Publication Data

    Regional economic outlook. Asia and Pacific. —

    Washington, D.C. : International Monetary Fund, 2005-

    • v. ; cm. — (World economic and financial surveys, 0258-7440)
    • Twice a year.
    • Began in 2005.
    • Some issues have thematic titles.

    1. Economic forecasting — Asia — Periodicals. 2. Economic forecasting — Pacific Area — Periodicals. 3. Asia — Economic conditions — 1945– Periodicals. 4. Pacific Area — Economic conditions — Periodicals. 5. Economic development — Asia — Periodicals. 6. Economic development — Pacific Area — Periodicals. I. Title: Asia and Pacific. II. International Monetary Fund. III. Series: World economic and financial surveys.


    ISBN: 9781616352509

    Publication orders may be placed online, by fax, or through the mail:

    International Monetary Fund, Publication Services

    P.O. Box 92780, Washington, D.C. 20090, U.S.A.

    Tel.: (202) 623-7430 Fax: (202) 623-7201




    In this Regional Economic Outlook: Asia and Pacific, the following groupings are employed:

    • “ASEAN” refers to Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, unless otherwise specified.
    • “East Asia” refers to China, Hong Kong SAR, the Republic of Korea, and Taiwan Province of China.
    • “Emerging Asia” refers to China, Hong Kong SAR, India, Indonesia, the Republic of Korea, Malaysia, the Philippines, Singapore, Taiwan Province of China, Thailand, and Vietnam.
    • “Industrial Asia” refers to Australia, Japan, and New Zealand.
    • “South Asia” refers to Bangladesh, India, and Sri Lanka.
    • “Asia” refers to ASEAN, East Asia, Industrial Asia, and South Asia.
    • “EU” refers to the European Union.
    • “G-2” refers to the euro area and the United States.
    • “G-7” refers to Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
    • “G-20” refers to Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, the Republic of Korea, Mexico, the Russian Federation, Saudi Arabia, South Africa, Turkey, the United Kingdom, and the United States.

    The following abbreviations are used:


    Association of Southeast Asian Nations


    Banco Bilbao Vizcaya Argentaria


    Bank for International Settlements


    Capital Asset Pricing Model


    capital adequacy ratios


    foreign direct investment


    free trade agreements


    Financial Times Stock Exchange


    fiscal year


    gross domestic product


    Hong Kong Shanghai Banking Corporation


    low-income countries


    Morgan Stanley Capital International


    National Association of Securities Dealers Automated Quotations


    Organization for Economic Cooperation and Development


    Pacific Island countries


    purchasing managers’ index


    state economic enterprises


    small and medium-sized enterprises


    Chicago Board Options Exchange Market Volatility Index


    World Economic Outlook

    The following conventions are used:

    • In tables, a blank cell indicates “not applicable,” ellipsis points (…) indicate “not available,” and 0 or 0.0 indicates “zero” or “negligible.” Minor discrepancies between sums of constituent figures and totals are due to rounding.
    • In figures and tables, shaded areas show IMF projections.
    • An en dash (–) between years or months (for example, 2007–08 or January—June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2007/08) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2009).
    • An em dash (—) indicates the figure is zero or less than half the final digit shown.
    • “Billion” means a thousand million; “trillion” means a thousand billion.
    • “Basis points” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).

    As used in this report, the term “country” does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.

    This Regional Economic Outlook: Asia and Pacific was prepared by a team coordinated by Roberto Cardarelli of the IMF’s Asia and Pacific Department, under the overall direction of Anoop Singh. Contributors include Ashvin Ahuja, Shekhar Aiyar, Rahul Anand, Benjamin Bingham, Ravi Balakrishnan, S. Pelin Berkmen, Nigel Chalk, Ding Ding, Sergei Dodzin, Nombulelo Duma, Selim Elekdag, Sonali Jain-Chandra, Tsin Zhen Koh, W. Raphael Lam, Adil Mohommad, Papa N’Diaye, Malhar Nabar, Sylwia Nowak, Alexander Pitt, Phurichai Rungcharoenkitkul, Olaf Unteroberdoerster, Jade Vichyanond, Yiqun Wu, and Yong Sarah Zhou. Souvik Gupta and Hye Sun Kim provided research assistance. Lesa Yee provided production assistance. Joseph Procopio, Joanne Blake, and Michael Harrup of the IMF’s External Relations Department edited the volume and coordinated its publication and release. This report is based on data available as of April 11, 2012 and includes comments from other departments and some Executive Directors.

    Executive Summary

    Global economic prospects have improved somewhat in 2012. After a sharp slowdown at the end of 2011, there is growing evidence that global activity is set to strengthen in the second half of 2012. Financial conditions have eased considerably and risk appetite rebounded in the first quarter after policymakers circumvented an imminent crisis in the euro area.

    Growth in Asia is also expected to gain momentum over the course of 2012. Although activity slowed markedly across the region in the last quarter of 2011, mainly due to weakening external demand, domestic demand has generally remained strong, as reflected in low unemployment, high capacity utilization, and robust credit growth. In the first months of 2012, leading indicators of activity strengthened, inflation expectations picked up, and capital inflows into Emerging Asia rebounded. Growth for the Asia and Pacific region as a whole is projected to be at 6 percent in 2012, broadly unchanged from last year, before rising to about 6½ percent in 2013.

    Nevertheless, the global economy remains fragile, exposing Asia to serious downside risks. The debt crisis in the euro area has not been fully resolved, and financial turmoil could still escalate in the region and spread globally, while increased geopolitical risks could push energy prices sharply higher. So far, stronger economic and policy fundamentals have helped buffer Asian economies against the global financial crisis, including by limiting adverse financial market spillovers (Chapter 2) and ameliorating the impact of deleveraging by European banks (Chapter 3). But a sharp fall in exports to advanced economies and a reversal of foreign capital flows would severely impact activity in Asia, both directly and through knock-on effects on domestic demand. Moreover, a shock to commodity prices could create difficult trade-offs between inflationary pressures and budgetary risks from energy and food subsidies.

    On the other hand, there are also upside risks to our central scenario. Because macroeconomic policy has remained generally accommodative, further stabilization of global economic and financial conditions over the course of 2012 could boost growth and revive overheating pressures in the region.

    Against this background, Asian policymakers face the difficult task of calibrating the amount of insurance needed to support stable, noninflationary growth. Pausing the normalization of macroeconomic policies when the global recovery stalled in late 2011 was fully warranted, given the uncertainties at the time. Now, however, policymakers should be ready to shift gears and renew their tightening cycle as overheating pressures become evident. Of course, the balance of risks differs from country to country. Economies with greater exposure to downside risks and those closer to neutral monetary policy stances could afford to pause longer, but others with more accommodative conditions, stickier core inflation, and more buoyant credit growth may need a faster return to more neutral policy stances. Similarly, the pace of fiscal consolidation should be calibrated to country-specific circumstances, with a more rapid pace adopted in countries with large, cyclically adjusted deficits and elevated debt profiles.

    The best form of creating insurance against the risk of external shocks remains strengthening domestic sources of growth. Lower trade surpluses in China have raised the likelihood that the shift of global demand to major surplus economies is finally taking place, but sustainable rebalancing will nonetheless depend on China’s successful transition from investment-led to consumption-led growth (Chapter 4). In India, improving the investment climate and infrastructure, and education, as well as facilitating trade and easing labor laws will be keys to maximizing gains from its ongoing demographic transition. Among ASEAN economies, public investment in infrastructure within appropriate medium-term frameworks would help crowd-in private investment and promote more broad-based growth while safeguarding fiscal sustainability.

    Asian low-income and small island economies face particular challenges (Chapter 5). In low-income countries, attracting foreign direct investment (including from other Asian economies) will be key to helping these countries participate more fully in Asia’s growth dynamics and benefit from the region’s rebalancing. Pacific and other small island economies face the challenge of improving economic resilience in the face of adverse global economic spillovers and broadening sources of growth over the medium term.

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