2012
Key messages Asia-Pacific growth to slow in 2012 amidst global turbulence: Spillovers of the euro zone turmoil Global oil price hikes Excess liquidity and volatile capital flows Key long-term challenge: high & volatile commodity prices To steer inclusive development the Asia-Pacific region should: Undertake actions to stimulate & rebalance growth Promote regional cooperation to share risks & opportunities Play an active role in building development-friendly global economic environment & governance Implement long-term structural reforms to cope with high commodity prices 2
Percentage 2012: Growth decelerates but Asia-Pacific is growth pole Growth is forecast to moderate to 6.5% in 2012 from 7% in 2011, with downward pressures from subdued developed economies The extent of slowdown varies across subregions Inflation likely to soften to 4.8% in 2012 from 6.1% in 2011 Despite the slowdown, the region remains an anchor of stability and growth pole for the world economy Developing Asia-Pacific accounts for a quarter of trade in Africa 15 10 5 0-5 Asia-Pacific Africa Middle East Latin America GDP growth Asian-Pacific developing economies World developed economies 2006 2007 2008 2009 2010 2011 2012 2012 2011 0 2 4 6 3 8 Percentage
(Percentage) GDP growth in selected economies 2010 2011 2012 2010 2011 2012 Australia 2.5 2.0 3.5 Nepal 4.0 3.5 4.5 Bangladesh 6.1 6.7 6.6 Pakistan 3.8 2.4 4.0 Bhutan 11.8 5.4 9.8 Papua New Guinea 7.1 8.9 7.8 Cambodia 6.0 6.9 6.7 Philippines 7.6 3.7 4.8 China 10.4 9.2 8.6 Republic of Korea 6.1 3.6 3.5 Fiji -0.2 2.1 2.3 Russian Federation 4.0 4.3 3.8 India 8.4 6.9 7.5 Samoa 0.2 2.1 2.5 Indonesia 6.1 6.5 6.5 Singapore 14.8 4.9 3.0 Iran (Islamic Rep. of) 3.2 4.0 3.0 Sri Lanka 8.0 8.3 7.2 Japan 3.9-0.7 2.1 Thailand 7.8 0.1 5.8 Kazakhstan 7.0 7.5 6.2 Turkey 9.0 8.5 3.2 Malaysia 7.2 5.1 4.5 Uzbekistan 8.5 8.3 8.0 Mongolia 6.4 17.3 16.0 Viet Nam 6.8 5.9 5.8 Myanmar 5.3 5.5 6.2 4
(Percentage) Inflation in selected economies 2010 2011 2012 2010 2011 2012 Australia 2.8 3.4 3.3 Nepal 9.6 9.6 8.0 Bangladesh 7.3 8.8 11.0 Pakistan 11.7 13.9 12.0 Bhutan 6.1 8.3 7.5 Papua New Guinea 6.0 8.7 7.6 Cambodia 4.0 5.5 5.4 Philippines 3.8 4.8 3.7 China 3.3 5.4 4.0 Republic of Korea 2.9 4.0 3.3 Fiji 5.4 8.7 4.0 Russian Federation 6.9 8.4 5.0 India 10.4 8.4 6.5 Samoa -0.2 2.9 5.0 Indonesia 5.1 5.4 5.6 Singapore 2.8 5.2 3.3 Iran (Islamic Rep. of) 12.4 23.0 12.5 Sri Lanka 5.9 6.7 6.0 Japan -0.7-0.3 0.5 Thailand 3.3 3.8 3.8 Kazakhstan 7.1 8.3 5.5 Turkey 8.6 6.5 9.3 Malaysia 1.7 3.2 2.6 Uzbekistan 9.4 13.5 12.5 Mongolia 10.1 9.2 9.2 Viet Nam 8.9 18.7 9.8 Myanmar 7.7 4.2 6.2 5
2007 2008 2009 2010 2011 2012f 2013f Key downside risks Euro zone crisis would cut growth by at least 1.3 percentage points and export value by $390 billion from the baseline 14 million fewer people could escape poverty by 2013 LDCs and LLDCs suffer the most Oil price surges could lift inflation by 1.3 percentage points with a greater impact on poorer groups. Fuel price subsidy bill can be $15 billion higher GDP growth in Asia-Pacific Loose monetary policies in developed economies heighten the risk of asset market bubbles, exchange rate appreciation and inflationary pressures The imposition of trade restrictive measures would impact exports On the upside, weak demand from advanced economies is cushioned by robust intraregional trade and investment 12 10 8 6 4 Baseline scenario Oil price surge scenario 6
Percentage Percentage of GDP Policy challenge I Managing the growth and inflation balance Asia-Pacific generally has room for fiscal and monetary policy responses The concern with enactment of stimulus measures is their impact on inflation Policymakers need to find their preferred inflation-growth nexus 80 60 40 20 0 2000 2004 2008 2012f 2016f Discount rates in Asia-Pacific 9 8 Government debt South / South-West South-East East / North-East North / Central Pacific Islands Mean Median 7 6 5 7 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Policy challenge II Coping with capital flows Extreme capital inflows, mainly driven by debt investment Still striving to arrive at the appropriate financial market policies Overall stringency of measures help prevent extraordinarily high surges in inflows 30 20 10 Gross inflows during sudden surges (% of GDP) Capital account management measures must be designed to deal with of a new normal of short-term capital inflows 0 1981-1995 1996-2000 2001-2005 2006-2010 8
Percent Policy challenge III Addressing jobless recovery Insufficient job creation in the formal sector in developing countries High youth unemployment: the young are over 3 times more likely to be unemployed 9 6 Average growth rate in Asia-Pacific Over 1 billion workers are in vulnerable employment Employment policies should improve productivity and working conditions and increase youth employment opportunities 3 0 2000-2008 2009-2011 GDP growth Employment growth 9
Developing AP East/North-East North/Central South-East South/South-West Policy challenge IV Rising income and social inequalities Growth helped reducing poverty but income inequality on the rise Gini index rose worryingly from 32 to 38 in the past decades Social development has been significantly constrained by the levels of inequality Ensuring equal opportunities to those who have been left behind 50 40 30 20 10 0 Gini inequality index 1990s 2000s 10
Year-on-year change (%) Percentage change (y-o-y) Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Damages and losses in Asia- Pacific are at least $267 billion in 2011 Large spillovers to other economies in regional production networks Need to invest more in disaster risk reduction Government to take a leading role in disaster prevention and management, and in better utilizing regional cooperation frameworks Policy challenge V Dealing with disaster risks 60 40 20 0-20 -40-60 -80-100 20 15 10 5 0-5 -10 Thailand's manufacturing production index Manufacturing production index Electrical component production Automotive production x Japan's manufacturing production index Manufacturing production index Electrical component production Automotive production Oct-11 Nov-11 Dec-11 Jan-12 11
Policy challenge VI Rebalancing towards better-quality growth The medium-term need for the region continues to be to redirect its growth drivers from extra-regional demand to intra-regional and domestic demand Policies should be designed to: Increase the inclusiveness of growth Broadening social protection and providing quality public service delivery Foster the development of the agricultural sector Sustainable, knowledge-intensive green revolution Support the green economy Public-private finance and low-cost access to technology Exploit the potential of regional economic integration A pan- Asia-Pacific integrated market and enhanced physical connectivity 12
Policy challenge VII Development-friendly global economic environment and governance The region has to make the international community aware of the need to undertake reforms to: Revive growth and employment Avoid excessive liquidity creation Moderate the volatility of oil and food prices Build a more development-friendly int l financial architecture The United Nations should play a leading role in facilitating broad-based consultations on global issues, e.g. an outlet for non-g20 countries to communicate their views 13
Rising trend since 2000, punctuated by the global economic crisis Long-term challenge Living with high commodity prices Prices have increased from 1.8% to 17.4% per year The commodity boom can be seen in the context of the rise of emerging economies, including in Asia-Pacific 250 200 150 100 50 80% 60% 40% Commodity prices indices real 2005 US dollar terms (1960=100) Metals & Minerals Beverages Food Raw Materials Energy (right axis) 0 0 1960 1970 1980 1990 2000 2010 Share of World's GDP Developed economies 1400 1200 1000 800 600 400 200 20% Asia-Pacific 0% 14 1820 1847 1877 1907 1937 1967 1997
Share of countries within each category How price shifts have changed incentives towards increasing modernization 100% 80% 60% 40% 20% Catching-up countries Commodity-boom countries Aspiring countries 0% 1991-2001- 2000 2010 1991-2001- 2000 2010 diversify towrads more complex products produce more of the same specialize in fewer and less complex products Catching-up countries stay where they are Commodity-boom countries fall back Aspiring countries have fewer chances to move up 1991-2001- 2000 2010 15
Policy options Adapting to an era of high commodity prices Catching-up countries: Diversify economic structure Create productive employment opportunities Increase domestic consumption Commodity-boom countries: Shield import-competing and non-resource export sectors from deindustrialization Use resource flows to smooth the ups and downs in revenue Enhance human capital to foster technical progress in resource sector Aspiring countries: Reduce reliance on few labour-intensive manufactures by participating in regional supply chains Strengthen social protection and boost agricultural productivity to cope with high food prices 16
Towards shared prosperity The region continues to face a challenging external economic climate Fortunately, most countries are in a favourable position to undertake a wide range of policy actions to stimulate and rebalance growth Enhanced regional cooperation will enable national policies to have greater influence both at the regional and international level An inclusive development path boosts new growth drivers by addressing the wide gaps in income and social progress 17
Thank you Economic and Social Survey of Asia and the Pacific 2012 is downloadable on: www.unescap.org/survey2012/