recent trends - tdri
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Sudhir Shetty
Chief Economist
East Asia and Pacific
The World Bank
RECENT TRENDS
2
3
4
5
6
7
8
Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016
Indonesia Malaysia Philippines Thailand Vietnam China
(GDP growth, year-on-year percent change)
Growth Continues To Be Resilient …
... Supported by Fiscal Stimulus
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0Q
1-2
01
3
Q2
-20
13
Q3
-20
13
Q4
-20
13
Q1
-20
14
Q2
-20
14
Q3
-20
14
Q4
-20
14
Q1
-20
15
Q2
-20
15
Q3
-20
15
Q4
-20
15
Q1
-20
16
Q2
-20
16
China Malaysia Philippines Thailand Indonesia
(General government fiscal balance, four quarter moving average, percent of GDP)
And Monetary Accommodation …
Jan-14
Dec-14
Feb-14Sep-14
May-14
Feb-14
-2
-1
0
1
2
3
4
5
6
7
China Indonesia Malaysia Philippines Thailand Vietnam
Top of current cycle Real policy rate as of July 2016 10-year average
(Real policy rate, percentage points)
… And EAP Has Outpaced Other Developing Regions
-2
0
2
4
6
8
10
20
12
20
13
20
14
20
15
H1 2
01
6
20
12
20
13
20
14
20
15
H1 2
01
6
20
12
20
13
20
14
20
15
H1 2
01
6
20
12
20
13
20
14
20
15
H1 2
01
6
20
12
20
13
20
14
20
15
20
12
20
13
20
14
20
15
EAP SAR ECA LAC MENA SSA
Percent
(Regional GDP growth, percent)
Inflation Remains Subdued While Deflation Risks Are Receding
(Headline inflation, end of period year-on-year,
percent)
-10%
-5%
0%
5%
10%
15%
20%
Aug-1
0
Apr-
11
De
c-1
1
Aug-1
2
Apr-
13
De
c-1
3
Aug-1
4
Apr-
15
De
c-1
5
Aug-1
6
China Malaysia
Philippines Thailand
-2%
0%
2%
4%
6%
8%
10%
Aug-1
2
Nov-1
2
Feb
-13
Ma
y-1
3
Aug-1
3
Nov-1
3
Feb
-14
Ma
y-1
4
Aug-1
4
Nov-1
4
Feb
-15
Ma
y-1
5
Aug-1
5
Nov-1
5
Feb
-16
Ma
y-1
6
Aug-1
6
China IndonesiaMalaysia PhilippinesThailand Vietnam
(Producer price inflation, end of period year-
on-year, percent)
Commodity Prices Remain Low …
(Commodity price indices, 2010=100)
20
40
60
80
100
120
140
160
20
11
M07
20
12
M01
20
12
M07
20
13
M01
20
13
M07
20
14
M01
20
14
M07
20
15
M01
20
15
M07
20
16
M01
20
16
M07
Energy Agriculture Metals & Minerals
9
Trade Balances Have Weakened
(Export volumes, index of 12-month moving sum, Jan 2011 = 100)
85
90
95
100
105
110
115
120
125
130
Jan
-20
11
Ma
r-20
11
Ma
y-2
011
Jul-
20
11
Sep-2
011
No
v-2
011
Jan
-20
12
Ma
r-20
12
Ma
y-2
012
Jul-
20
12
Sep-2
012
No
v-2
012
Jan
-20
13
Ma
r-20
13
Ma
y-2
013
Jul-
20
13
Sep-2
013
No
v-2
013
Jan
-20
14
Ma
r-20
14
Ma
y-2
014
Jul-
20
14
Sep-2
014
No
v-2
014
Jan
-20
15
Ma
r-20
15
Ma
y-2
015
Jul-
20
15
Sep-2
015
No
v-2
015
Jan
-20
16
Ma
r-20
16
Ma
y-2
016
China Thailand Malaysia Indonesia Philippines
Public Investment Remains Low In Many Countries
(General government capital expenditure, percent of GDP)
2
3
4
5
6
7
8
9
10
11
12
2011 2012 2013 2014 2015 2016
Cambodia Malaysia Myanmar Philippines
Indonesia Vietnam Thailand
OUTLOOK
AND RISKS
Growth in Developing EAP Will Likely Be Stable
(Annual percentage change in GDP)
-2
-1
0
1
2
3
4
5
6
7
8
2015 2016 2017 2018
And Poverty Is Expected To Continue Falling
(Percentage of population in poverty, U.S.$3.10-a-day PPP poverty line)
DEVELOPING EAP
2015 2016 2017 2018
Poverty rate (percent) 12.1 10.6 9.3 8.3
Number of poor (millions) 251 223 197 175
DEVELOPING EAP EX-CHINA
2015 2016 2017 2018
Poverty rate (percent) 20.3 19.0 17.7 16.4
Number of poor (millions) 145 137 129 121
The Rising Middle Class in East Asia(Distribution of consumption – 2002-15)
0
10
20
30
40
50
60
70
80
90
100
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Per
cen
t o
f d
evel
op
ing E
AP
popula
tion
Extreme poor – less than $1.90 PPP/day
Economically secure -- $5.50 -- $15 PPP/day
Moderate poor – $1.90 -- $3.10 PPP/day
Vulnerable -- $3.10 – 5.50 PPP/day
Global middle class – greater than $15 PPP/day
15
But Significant Risks Remain for Developing EAP …
• Sharper than expected slowdown in advanced economies or
China
• Continued slow growth in global trade
• Weak commodity prices
• Financial market turbulence
• Higher borrowing costs
• Capital flows could slow or reverse
• High domestic leverage
• Growing risk of financial stress among corporates and households
• Impacts exacerbated by external shocks
Growth in Advanced Economies Will Likely Be Slow
-4
-2
0
2
4
6
8
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
e
20
17
f
20
18
f
World Advanced economies Emerging and developing economies
Percent
(Annual percentage change in GDP)
And Commodity Prices Will Remain Low
(Index, 2010 = 100)
50
60
70
80
90
100
110
120
2014 2015 2016 2017 2018
Energy commodities
Oct-16 Apr-16 Oct-15 Apr-15
75
80
85
90
95
100
2014 2015 2016 2017 2018
Non-energy commodities
Oct-16 Apr-16 Oct-15 Apr-15
Regional Exports Depend On Global Growth Outlook
(Gross exports, percent of GDP, 2015)
0
10
20
30
40
50
60
70
80
Cam
bo
dia
Fiji
Ind
on
esia
La
o P
DR
Ma
laysia
Mo
ngo
lia
Myan
mar
Papu
a N
ew
Guin
ea
Phili
ppin
es
Solo
mon
Isla
nds
Tha
iland
Vie
tna
m
ChinaEmerging and dev. Asia excl. ChinaEmerging and dev. excl. EAPEuropean UnionJapanUnited States
When the U.S. Economy Slows…Other Economies Slow Too
Impact of 1-percentage-point decline in
U.S. growth(Percentage point)
Source: World Bank.
Note: Cumulative impulse responses for different horizons due to a 1-percentage-point decline in US growth on impact. Bars represent medians, and error bars 16-84 percent confidence
bands. Left Panel. Emerging markets (EM) impact is the GDP-weighted average of BRICS and EM (excluding BRICS) responses. Right Panel. Global impact is the GDP-weighted
average of G6, US, BRICS, and EM (excluding BRICS) responses.
19
-3
-2
-1
0
On Impact 1 Year 2 Years
G6 Global
Impact of 1-percentage-point decline in
U.S. growth(Percentage point)
-3
-2
-1
0
On Impact 1 Year 2 Years
BRICS Emerging markets
Sources: CPB Netherlands Bureau for Economic Policy Analysis, World Bank, IMF, Haver Analytics.
Left Panel. Pre-crisis trend is extrapolated from 2000-06 onwards. Trade flows refer to the average of exports and imports. Last observation is June 2016. Right Panel. Temporary trade
barriers include antidumping, safeguards and countervailing duties. Based on the World Bank Temporary Trade Barriers database.
20
Retreat from Globalization?
Weaker Trade Growth; Growing Barriers
Trade flows(Index, 2008 = 100)
50
70
90
110
130
150
2000 2004 2008 2012 2016
Pre-crisis trend
Products subject to temporary trade barriers(Percent of total products)
1
2
3
2000 2005 2010 2015
Global Financial Tightening Will Matter
0
10
20
30
40
50
60
70
80
90
100
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
China Mongolia Malaysia
Thailand Vietnam Indonesia
Lao PDR Cambodia Philippines
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
(US$ denominated debt, percent of total
public external debt)(Short-term debt, percent of gross external debt)
With High And Still Rising Private Sector Debt …
0
50
100
150
200
250
2010
2015
2010
2015
2010
2015
2010
2015
2010
2015
2010
2015
2010
2015
China Malaysia Vietnam Thailand Philippines Indonesia Emergingeconomies
Credit to Non-financial corporations
Credit to Households
Credit to General Government
0%
5%
10%
15%
20%
25%
Jan
-13
Ma
r-13
Ma
y-1
3Jul-
13
Sep-1
3N
ov-1
3Jan
-14
Ma
r-14
Ma
y-1
4Jul-
14
Sep-1
4N
ov-1
4Jan
-15
Ma
r-15
Ma
y-1
5Jul-
15
Sep-1
5N
ov-1
5Jan
-16
Ma
r-16
Ma
y-1
6Jul-
16
China IndonesiaMalaysia PhilippinesThailand Vietnam
(Credit by sector, percent of GDP) (Year-on-year real growth in private sector
credit)
… A Key Source of Vulnerability In Many Countries
0
1
2
3
4
5
6
7
8
2010 2011 2012 2013 2014 2015
China Indonesia Malaysia
Philippines Thailand Vietnam
(Debt service as a percent of income) (Return on assets, listed firms, percent)
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0
5
10
15
20
25
Jun
-08
Dec-0
8
Jun
-09
Dec-0
9
Jun
-10
Dec-1
0
Jun
-11
Dec-1
1
Jun
-12
Dec-1
2
Jun
-13
Dec-1
3
Jun
-14
Dec-1
4
Jun
-15
Dec-1
5
China Malaysia Thailand Indonesia
POLICY IMPLICATIONS
Vulnerabilities Need To Be Reduced Across the Region
• Region’s continued resilience hinges on preserving
macrofinancial stability
By reducing financial risks
And maintaining or rebuilding fiscal buffers
• Global financial conditions are likely to tighten
soon
Decisive action is needed now to maintain
macro-financial stability
Policy Priorities For the Region
• In China:
Bring credit growth under control
Reform the corporate sector
Strengthen the inter-governmental fiscal system
• Elsewhere in Developing EAP:
Enhance financial regulation by strengthening regulatory oversight and
implementing micro- and macro-prudential measures
Maintain fiscal space, including by increasing revenues
Some commodity exporters need to close fiscal deficits, e.g., Mongolia,
Timor-Leste
Countercyclical stabilization not a priority, given stable growth prospects
Where there is fiscal space, focus new spending on addressing public
infrastructure deficits
Improve the efficiency of public investment
Implications for Thailand
• Growth prospects for 2016-18 slightly more favorable than in the recent past
• Private consumption is the main driver of growth
• Stronger financial regulation, including of non-bank financial institutions
• Need to raise public investment, including to crowd in private investment
• Emphasize improved efficiency of public investment
• Streamline regulations to facilitate foreign direct investment flows
Prioritize Productivity-boosting Fiscal Spending
• Focus new spending on addressing priority
infrastructure deficits, in partnership with
private sector
• Increase the efficiency of public investment
Improve public investment management
Reduce bottlenecks to implementation
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