- International Monetary Fund. Asia and Pacific Dept
- Published Date:
- October 2011
© 2011 International Monetary Fund
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 also 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.
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- Executive Summary
- I. Navigating an Uncertain Global Environment
- II. Drivers and Implications of Rapid Credit Growth in Emerging Asia
- III. Asia’s Quest for Inclusive Growth
- IV. The Benefits of Further Financial Integration in Asia
- V. Asian Low-Income and Pacific Island Countries: Managing Inflation Risks and Strengthening Growth Prospects
- 1.1 Vietnam: Stabilization at the Crossroads
- 1.2 How Large Are Chinese Inflation Spillovers to the Region?
- 1.3 Recent Trends in ASEAN Exports to China
- 1.4 Sterilization of Reserve Accumulation in Times of Large Capital Inflows
- 1.5 A Strategy for Growth and Fiscal Sustainability in Japan
- 4.1 Assessing the Contagion of Systemic Risk form Financial Integration through Banks
- 1.1 Asia: Real GDP
- 3.1 Number of People Living on Less than $1.25 per Day
- 3.2 Pro-poor and Inclusive Growth Measures
- 5.1 Selected Asia: Decomposition of Inflation and Exchange Rate Regimes
- 5.2 Selected Asia: Monetary Conditions
- 1.1 Selected Asia: Real GDP at Market Prices
- 1.2 Selected Asia: Exports of Goods
- 1.3 Selected Asia: Financial Condition Index (FCI)
- 1.4 Selected Asia: Contributions to Year-to-Date Changes in REER
- 1.5 Selected Asia: Change in Inflation Rates since January 2011
- 1.6 Selected Asia: Inflation Target Tracker
- 1.7 Emerging Asia: Equity and Bond Funds—Weekly Net Flows in 2011
- 1.8 Selected Asia: Trade Links to Japan and Export Growth in 2011:Q2
- 1.9 Selected Asia: Contributions to Projected Growth
- 1.10 Selected Asia: Headline Consumer Price Inflation
- 1.11 Selected Asia: Current Account Balances
- 1.12 Asia: GDP Growth
- 1.13 Selected Asia: Foreign Holdings in Local Currency Government Bonds
- 1.14 Consolidated Claims of European and U.S. Banks on Selected Asia
- 1.15 Selected Asia: U.S. Dollar—Local Currency Basis Swap Spreads
- 1.16 Selected Asia: Impact of Severe Global Slowdown on Real GDP Growth
- 1.17 Selected Asia: Impact of Severe Global Slowdown on Selected Indicators
- 1.18 Selected Asia: Impact on Real GDP Growth of Discretionary Fiscal Spending in China
- 1.19 Emerging Asia: External Bond Issuance by Corporations
- 1.20 Emerging Asia: Leverage in Corporate Sector
- 1.21 Selected Asia: Debt-to-Equity Ratio
- 1.22 Asia: Debt-to-Equity Ratio during Recoveries from 2001 and 2008 Recessions
- 1.23 Emerging Asia: Leverage in Different Sectors
- 1.24 Selected Asia: Tier 1 Ratio of Top 25 Banks
- 1.25 Emerging Asia: Overheating Map
- 1.26 Selected Asia: Change in Inflation Expectations for 2011 since March 2011
- 1.27 Selected Asia: Overheating Index and Vulnerabilities to a Slowdown in Growth in G-2
- 1.28 Selected Asia: Change in General Government Cyclically Adjusted Fiscal Balance
- 1.29 Selected Asia: Fiscal Space
- 1.30 Selected Asia: Cyclically Adjusted Changes in General Government Spending
- 1.31 Selected Asia: Deviation from Model-Based Norms of Public Spending on Health and Education
- 1.32 Selected Asia: Deviation of Retail Gasoline and Diesel Prices from International Prices
- 1.33 Selected Asia: Increase in Net Oil Subsidy
- 2.1 Nominal Credit to Private Sector
- 2.2 Crises Associated with Emerging Market Credit Booms
- 2.3 Real Credit
- 2.4 Credit Booms Across Emerging Economies
- 2.5 Emerging Asia: Real Credit Growth and the Role of Domestic versus External Factors
- 2.6 Real Credit Growth in Emerging Asia: Forward-Looking Scenarios
- 3.1 Stylized Facts: Asia’s Growth Experience over the Last Two Decades
- 3.2 Selected Asia: Change in Poverty and Inequality during the Global Crisis
- 3.3 Income Elasticity of Poverty Reduction
- 3.4 Degree of Inclusiveness of Growth
- 3.5 Fiscal Policy and Inclusiveness
- 3.6 Labor Market Institutions and Inclusiveness
- 4.1 Regional and Nonregional Sources of Portfolio Investment Liabilities, 2001–09
- 4.2 Trade and Financial Integration, 2001–09
- 4.3 Deviations from Model-Based Norms of Financial Integration
- 4.4 Risk Sharing within and between Regions
- 4.5 Trade-Offs between Risk Sharing and Contagion
- 4.6 Decomposing the Gap between International Risk Sharing in Asia and the G-2
- 4.7 Effect of Financial Integration on Current Account Surplus
- 5.1 Selected Asia: Inflation and World Prices
- 5.2 Selected Asia: Headline Inflation, January 2005–Latest
- 5.3 Selected Asia: Inflation Persistence, 2005–11
- 5.4 Pass-Through from International Prices to Domestic Prices
- 5.5 PICs: Real GDP Growth
- 5.6 PICs Real GDP Growth: Correlation with Australia and New Zealand, 2002–10
- 5.7 PICs (Commodity Importers): Real GDP Growth around Downturns
- 5.8 PICs: Impulse Response of Output Loss to Terms-of-Trade Shock
- 5.9 PICs: Impulse Response of Output Loss to External Demand Shock
In this Regional Economic Outlook: Asia and Pacific, the following groupings are employed:
- “ASEAN” refers to Brunei Darussalam, Cambodia, Indonesia, Lao P.D.R., Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
- “East Asia” refers to China, Hong Kong SAR, Korea, and Taiwan Province of China
- “Emerging Asia” refers to China, Hong Kong SAR, India, Indonesia, 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, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, and the United States.
The following abbreviations are used:
Association of Southeast Asian Nations
Bank for International Settlements
conditional cash transfer programs
credit default swap
consumer price index
Eastern Caribbean Currency Union
foreign direct investment
gross domestic product
Global Integrated Monetary and Fiscal model
net domestic assets
nominal effective exchange rate
net foreign assets
newly industrialized economy
Organisation for Economic Cooperation and Development
Pacific Island countries
purchasing managers’ index
real effective exchange rate
seasonally adjusted at an annual rate
State Bank of Vietnam
small and medium-sized enterprises
structural vector autoregression
United Nations University, World Institute for Development Economics Research
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.
- 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 Vivek Arora and Roberto Cardarelli of the IMF’s Asia and Pacific Department, under the overall direction of Anoop Singh. Contributors include Ravi Balakrishnan, S. Pelin Berkmen, David Cowen, Sean Craig, Kessia De Leo, Nombulelo Duma, Selim Elekdag, Souvik Gupta, Fei Han, Sonali Jain-Chandra, Hye Sun Kim, W. Raphael Lam, Joedianna Mohammed, Sylwia Nowak, Ceyda Oner, Alexander Pitt, Phurichai Rungcharoenkitkul, Werner Schule, Shiyu Raj Singh, Chad Steinberg, Murtaza Syed, Patrizia Tumbarello, Olaf Unteroberdoerster, Jade Vichyanond, Yiqun Wu, Yi Xiong, and Yongzheng Yang. Jingfang Hao and Sanjeeda Munmun Haque provided research assistance. Kessia De Leo and Lesa Yee provided production assistance. Joanne Blake, Martha Bonilla 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 September 27, 2011 and includes comments from other departments and some Executive Directors.
In this version of the Asia and Pacific Regional Economic Outlook we introduced a change in format, as the analytical chapters are now shorter as they summarize the main results of research published or forthcoming in the IMF working paper series.
The recovery in advanced economies is more sluggish than anticipated at the time of our April 2011 Asia and Pacific Regional Economic Outlook and the global outlook has become increasingly uncertain. The handover from public stimulus to private demand has stalled in the United States, and euro area financial turbulence has intensified. While the outlook for advanced economies is for a continuing, although weak, expansion over the remainder of 2011 and 2012, the risk of a renewed slowdown is greater now than six months ago, especially if structural fragilities remain unresolved.
Growth in Asia has also moderated since the second quarter of 2011, mainly as a result of weakening external demand. Domestic demand has been generally resilient, and overheating pressures remain elevated in a number of economies, with credit growth still robust and inflation momentum generally high. In line with the weaker global outlook, growth in Asia is expected to be slightly lower in 2011–12 than forecast in April 2011, but the expansion should remain healthy, supported by domestic demand, and inflation is expected to recede modestly after peaking in 2011. Nevertheless, risks for the Asia and Pacific region are also decidedly tilted to the downside. The sell-off in Asian financial markets in August and September 2011 underscores that an escalation of euro area financial turbulence and a renewed slowdown in the United States could have severe macroeconomic and financial spillovers to Asia.
The downside risks to growth amid persistent overheating pressures present Asian policymakers with a delicate balancing act, as they need to guard against risks to growth but also limit the adverse impact of prolonged easy financial conditions on inflation and balance sheet vulnerabilities. In economies where overheating pressures are more elevated and monetary conditions still accommodative, the return to more neutral monetary stances should continue, through both higher interest rates and more flexible exchange rates (Chapter II). However, in economies where inflation is within central banks’ target ranges and the exposure to severe external shocks is greater, a pause in monetary tightening may be warranted until the global uncertainties have lessened. Meanwhile, the normalization of fiscal policy stances should run its course: in many economies, fiscal positions remain accommodative, with structural deficits higher than their precrisis levels. If the downside risks to the global outlook were to materialize, Asian economies have the scope to reverse course and use a range of measures to cushion the impact on economic activity, as many did in response to the global crisis in 2008.
At the same time, the weakness in global demand only confirms that Asia would greatly benefit from further progress in rebalancing growth by developing domestic sources of demand. In addition to structural reforms, this would require a reprioritization of fiscal spending, in order to create fiscal space for critical infrastructure investment and social priority expenditure. These measures would help increase domestic demand over time, as well as make the region more resilient to external shocks, and they would also help to make growth in Asia more “inclusive.” Chapter III shows that despite fast growth and progress in poverty reduction, income inequality in Asia has increased over the last decade. Measures that deepen regional financial integration would also help with rebalancing, by improving access to finance and strengthening domestic demand (Chapter IV).
Asian low-income and Pacific Island economies face particular challenges in the near and medium term (Chapter V). In low-income countries, the fight against inflation is complicated by strong second round effects, the need to phase out subsidies, and less well anchored inflation expectations. Pacific Island economies need to undertake further structural reforms to lift potential growth.