The Medium to Long-Term Economic Outlook for Asia

Transcription

1 The Medium to Long-Term Economic Outlook for Asia February 3, 2017 Yoko Takeda Mitsubishi Research Institute Copyright (C) Mitsubishi Research Institute, Inc.

2 Issues for discussion for Asian Economy Copyright (C) Mitsubishi Research Institute, Inc. 1

3 Issues for discussion both for Asia and global economy Can developed economies overcome secular stagnation? Can we address anti-globalization and dissatisfaction with inequality? Will new digital technologies evoke a paradigm shift of global competition? Will a huge middle/high income class emerge in Asia? Copyright (C) Mitsubishi Research Institute, Inc. 2

4 New digital technologies may evoke a paradigm shift Factors That Determine Firm s Location Labor cost Labor cost Demand factor Technology Infrastructure Demand factor Customization Technology AI, IoT, Robots Social infrastructure Intellectual property Privacy protection Cyber security Source: MRI Copyright (C) Mitsubishi Research Institute, Inc. 3

5 Opportunities and disadvantages for emerging Asia Opportunities Some new technologies may diffuse rapidly in emerging economies due to the absence of vested interests. e.g. Mobile payments are rapidly becoming the norm in China. Disadvantages Jobs that were previously outsourced from developed economies to emerging economies may reverse course. e.g. Lack of skilled labor, immature legal system to protect privacy and patents. Copyright (C) Mitsubishi Research Institute, Inc. 4

6 Opportunities and disadvantages for emerging Asia Gross Merchandise Volume of Mobile Third-Party Payment in China Backshoring and Technology Intensity of the Sector in Europe, Mid (Trillion yuan) Forecasts Source: iresearch Global Inc. Copyright (C) Mitsubishi Research Institute, Inc. 5 Technology intensity (classified by sectors) High technology sectors Medium-high technology sectors Medium-low technology sectors Low technology sectors 3.0% 2.7% 5.3% 7.5% 0% 5% 10% Share of backshoring firms Notes: Results for Austria, Switzerland, Germany, Denmark, Spain, France, Hungary, Portugal, Netherlands, Sweden and Slovenia. Total number of observations is 3,293. Source: Dachs, B. and C. Zanker (2015), Backshoring of Production Activities in European Manufacturing.

7 GDP per capita Will a huge middle/high income class emerge? GDP Growth Rates and GDP per Capita (2015 vs forecast) 25,000 (US dollar) 20,000 22, forecast 15,000 China 10,000 5,000 11,305 Thailand 5,742 9,869 Indonesia 4,960 7,990 Actual in 2015 India 0 3,362 1, Real GDP growth rates (%, the average rates over ) Sources: IMF; MRI forecasts. Copyright (C) Mitsubishi Research Institute, Inc. 6

8 Consumption expenditure per capita / day Will a huge middle/high income class emerge? Population by Income Class in Emerging Asian Economies Upper high (>$40) Lower high ($20-$40) 1.9 billion people billion people Upper middle ($10-$20) Medium middle ($4-$10) Lower middle ($2-$4) Low (<$2) Sources: United Nations; IMF; The World Bank; MRI estimates. Copyright (C) Mitsubishi Research Institute, Inc Billion people

9 Will a huge middle/high income class emerge? Volume of Nominal Household Consumption in Emerging and Developed Countries 35 (Trillion dollar) Japan Brazil 29 India ASEAN Japan Euro Area 15 Euro Area China USA USA China Emerging Developed Emerging Developed Notes: All figures are MRI estimates. The ratios of household final consumption expenditure to GDP used for these estimates are the actual values of As for China, the ratio is set higher than the actual value on the assumption that China will shift to a consumption-driven economy. Sources: United Nations; IMF; The World Bank; MRI estimates. Copyright (C) Mitsubishi Research Institute, Inc. 8

10 Copyright (C) Mitsubishi Research Institute, Inc. 9 Global Outlook

11 MRI forecasts for global GDP growth rate Economic Outlook for Major Countries and Regions Going towards 2030 Euro Area 6.9% 5.7% 3.6% China Japan 2.6% USA. 2.0% 1.0% 0.6% 1.3% 1.0% 0.2% 2.2% 1.7% % 7.1% India 4.7% 4.8% 4.7% 3.8% ASEAN5 Brazil 1.9% 1.4% Copyright (C) Mitsubishi Research Institute, Inc % Notes: Real GDP growth rates after 2016 are MRI forecasts. As for Japan, data and forecasts are presented on a fiscal year basis. Sources: MRI forecasts.

12 Two possible catch-ups by 2030 Nominal GDP of Major Emerging and Developed Economies (Trillion dollar) India China Forecasts US- China reversal 35 USA Japan 30 ASEAN10 Euro Area Japan-India and Japan-ASEAN reversals Note1: Estimation results vary substantially depending on the assumption of exchange rates. The GDP growth rates after 2016 are MRI forecasts. The exchange rates are generally based on the IMF forecasts. As for China, the yuan is assumed to appreciate until 2020, and to stabilize after The Indian Rupee is assumed to depreciate about 1% per year. Japanese Yen rates are MRI forecasts. Notes2: ASEAN10 refers to Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Brunei Darussalam, Laos, Myanmar, and Cambodia. Sources: IMF; MRI forecasts. Copyright (C) Mitsubishi Research Institute, Inc. 11

13 Copyright (C) Mitsubishi Research Institute, Inc. 12 Japan Outlook

14 Economic outlook for Japan Japan s Potential GDP Growth Rate (Year-over-year percent change) TFP Capital stock Labor Potential GDP Forecasts Source: MRI estimates. Copyright (C) Mitsubishi Research Institute, Inc. 13

15 Promote innovation and mitigate demographic vortex Three prescriptions: Innovation e.g. AI, IoT, robots Economic system reform e.g. Labor market reform, social security reform More risk-taking by corporate sector e.g. Investments in new markets Japan s Potential GDP (Higher-growth Scenario) (Year-over year percent change) TFP Capital stock Labor Potential GDP Forecasts Sources: MRI questionnaires; Agency for National Resources and Energy; MRI estimates. Copyright (C) Mitsubishi Research Institute, Inc. 14

16 Conclusions Emerging Asian markets have marked growth potential. But, its actual performance depends on whether: (i) new digital technologies evoke a paradigm shift (ii) China can solve its structural problems (iii) emerging Asia can avoid the middle-income trap If Japan can conquer the challenges lying ahead, it has a chance to achieve both a high-quality growth and a sustainable society. Copyright (C) Mitsubishi Research Institute, Inc. 15

17 Appendix Economic Outlook for China Copyright (C) Mitsubishi Research Institute, Inc. 16

18 Economic outlook for China China s GDP growth rate may decline to 4 percent or lower in 2030 China s Potential GDP Growth Rate (Year-over-year percent change) 14 Labor 12 TFP 10 8 Forecasts Capital Stock Potential GDP Sources: CEIC; MRI Estimates. Copyright (C) Mitsubishi Research Institute, Inc. 17

19 The strengths and weaknesses in China s economy 1Transformation to an innovation-driven economy underway Venture Capital Funding of Startups in China 80 ( Billion dollar ) USA China Japan Sources: Venture Enterprise Center; Bloomberg. Copyright (C) Mitsubishi Research Institute, Inc. 18

20 The strengths and weaknesses in China s economy 2Ballooning non-performing loan problems China s Corporate and General Government Debt Non Performing Loans (Percent of GDP) Corporate debt (%) (Trillion yuan) 2.0 Non-performing loan value (right scale) Non-performing loan ratio (left scale) (Percent of GDP) General Government debt Note: Corporates are non-financial corporations, including state-owned enterprises. Source: BIS. Copyright (C) Mitsubishi Research Institute, Inc Sources: CEIC; China Banking Regulatory Commission

21 The strengths and weaknesses in China s economy 3Looming social instability due to rapidly aging Ratio of People Over 65 Years Old 15 (100 million people) (%) 30 Forecasts Total population (left scale) Ratio of people over 65 years old (right scale) Source: United Nations. Copyright (C) Mitsubishi Research Institute, Inc. 20

22 Thank you Copyright (C) Mitsubishi Research Institute, Inc. 21