Asia and the Pacific: Economic Outlook and Drivers

Transcription

1 2018/FDM1/004 Session 2.1 Asia and the Pacific: Economic Outlook and Drivers Purpose: Information Submitted by: International Monetary Fund Finance and Central Bank Deputies Meeting Port Moresby, Papua New Guinea March 2018

2 Asia and the Pacific: Economic Outlook and Drivers 1

3 Asia s growth pickup remains on track Growth Projections: World and Selected Asia (Percent change from a year earlier) World U.S. Euro Area Japan Emerging and Developing Asia China India* ASEAN-5* Russia Latin America and the Caribbean APEC* Revision from Oct N/A Revision from Oct N/A Source: World Economic Outlook Update, January 2018 except for APEC. Note: Figures for India are on a fiscal year basis. ASEAN-5 includes Indonesia, Malaysia, Philippines, Thailand and Vietnam. APEC countries growth forecast consists of January 2018 forecast and October 2017 forecast. 2

4 Asia s growth pickup remains on track as other regions are accounting for more Contribution to Growth and Growth Rate (percent, PPP-adjusted) IMF Projection 100% % % 70% % % 40% % % 10% 1.0 0% Asia Western hemisphere Europe Middle East & Central Asia Africa Growth rate - Global (RHS) Growth rate - Asia (RHS) Source: IMF Staff estimates. 3

5 Certain population in Asia is not benefiting from the economic growth Source: World Bank 4

6 Some countries need more investment in human capitals such as health and education Under-Five Mortality Rate in ASEAN Member States (per 1,000 births) Target Source: ASEAN Secretariat 5

7 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jul-17 Asia s exports are still growing due to other region s upswing Exports to Major Destinations (in percent; year-over-year growth) to U.S. to Euro area to Japan to China Source: Haver Analytics 6

8 Asia s domestic demand is strong, boosting imports... Contributions to Projected Growth (Year-over-year; percentage points) Net exports Investment Consumption Growth Asia Australia, Japan, New Zealand China East Asia (excluding China) India ASEAN 1 Sources: IMF, World Economic Outlook database; and IMF staff calculations. 1 ASEAN includes Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. 7

9 and contributing to the reduction in current account balances Asia: Current Account Balances (Percent of GDP) Australia, Japan, New Zealand (Estimate) 2018 (Projection) East Asia (excluding China) Sources: IMF, World Economic Outlook database; and IMF staff calculations. 1 ASEAN includes Malaysia, the Philippines, Singapore, Thailand, and Vietnam. 1 ASEAN China India Indonesia 8

10 Asia s inflation has been revised down along with other regions 2017 Inflation Forecast (Percent) 9 8 April 2017 WEO October 2017 WEO Asia Euro area Latin America and the Caribbean Middle East and North Africa United States Source: IMF World Economic Outlook. 9

11 Capital inflows to emerging countries remained positive Total Portfolio Flows (Billions of U.S. dollars) Africa & Middle East Emerging Europe Latin America Emerging Asia -40 Sep 15 Jan 16 May 16 Sep 16 Jan 17 May 17 Sep 17 Jan 18 Sources: National Sources; Bloomberg Finance L.P.; and Institute of International Finance. 10

12 High credit growth widespread in Asia has raised downside risks Fast Credit Growth and Wide Credit Gap (Percent of GDP) Hong Kong SAR Thailand Korea Malaysia China Singapore 50 0 Indonesia Vietnam Mongolia Cambodia Notes: Total credit to the private nonfinancial sector. Sources: Bank for International Settlements; and IMF staff estimates. 11

13 Market participants expect US accommodative monetary policy to sustain cyclical growth US: Contribution to Growth (percent, q/q seasonally adjusted, annualized) 6 US FOMC participants expect a faster tightening than market participants (percent, FF rate projections) Source: Haver Analytics Private Consumption Private Investment Residential Investment Government Expenditures Inventories Source: CME Note: Blue dots indicate the median projection. Red dots indicate the effective rate implied by the year-end Fed Fund future price. 12

14 China s growth is rebalancing, however, the country still faces a large credit gap Source: IMF Staff estimates. 13

15 Japan s recent growth momentum is positive. Japan's Debt-to-GDP Ratio (percent of GDP) IMF Projection IMF Projection Japan's Primary Balance (percent of GDP) IMF Projection Primary Balance (% of GDP) Primary Balance (% of GDP, Cyclically Adjusted) 14

16 Growth remain broadly stable in ASEAN, but countries face infrastructure gap Real Growth Projection (in percent) Developing Asian countries require more infrastructure investment: Selected ADB countries*, IMF Projection (annual averages, USD billion in 2015 prices) ASEAN-5 Emerging and Developing Asia Global Source: World Economic Outlook Update, January Note: ASEAN-5 includes Indonesia, Malaysia, Philippines, Thailand and Vietnam. Source: Asian Development Bank Note: Developing member countries include 24 countries (China is not included), future public investments are based on the 50 percent fiscal space assumption. Numbers in brackets indicate percentage of GDP. 15

17 The favorable position provides an opportunity to implement ambitious structural reforms. Main Challenge Key structural policy recommendations China India Japan Korea AUS and NZL ASEAN Small States Credit growth Corporate and banking sector strains Reflation and fiscal sustainability Declining productivity growth and demographic headwinds Housing affordability and recalibrating investment incentives Infrastructure gaps and quality Natural disasters/climate change Growth targets should be de-emphasized and the focus should be more on the quality and sustainability of growth. Addressing corporate and banking sector balance sheet weaknesses is key to safeguard financial stability and support credit growth and private investment. A comprehensive policy package of structural reforms combined with income and demand policies should help to reflate the economy and lift potential growth. Enhance the role of women in the economy, and emphasize innovation, especially in SMEs. Promote housing affordability and supply through planningzoning reforms and infrastructure push. Recalibrate tax incentives. Tackle structural constraints to growth such as the low quality of infrastructure. Restore fiscal discipline to build buffers. 16

18 Key messages and roadmap Asia is in a favorable position: growth is revised up. However, the sustainability of the pickup is still not clear. While Asia is more resilient, medium-term vulnerabilities have increased. The window for reforms is now. 17

19 LONG-TERM CHALLENGES IMPACT OF AGING 18

20 Asia is aging much faster compared to the experience of other advanced economies 19

21 Many parts of Asia are at risk of growing old before becoming rich 20