apec regional trends analysis – growth surges but...
TRANSCRIPT
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2018/SFOM16/006 Agenda Item: 1.4
APEC Regional Trends Analysis – Growth Surges But Uncertainty Persists
Purpose: Information
Submitted by: Policy Support Unit, APEC Secretariat
16th Senior Finance Officials’ MeetingMadang, Papua New Guinea
7-8 June 2018
Copyright © 2017 APEC Secretariat
Emmanuel A. San Andres, Analyst
APEC Policy Support Unit
APEC Regional Trends Analysis (ARTA)Growth Surges but Uncertainty Persists
Senior Finance Officials’ Meeting
7-8 June 2018
Madang, Papua New Guinea
Copyright © 2018 APEC Secretariat
Broad-based economic recovery is seen as
APEC surges to a 4.1% growth in 2017
• APEC grew faster at 4.1% in 2017 from 3.4% in 2016, mirroring the strength in global economic activity.
Sources: Economy sources; The Economist Economic and Financial Indicators; IMF WEO Database (October 2017); and PSU staff calculations.
Real GDP Growth Rates, year-on-year (y-o-y, in%), 2016 and 2017
-4
-2
0
2
4
6
8
Au
stra
lia
Bru
nei
Dar
uss
alam
Can
ada
Ch
ile
Ch
ina
Ho
ng
Ko
ng,
Ch
ina
Ind
on
esia
Jap
an
Ko
rea
Mal
aysi
a
Mex
ico
Ne
w Z
eal
and
Pap
ua
New
Gu
inea
Per
u
The
Ph
ilip
pin
es
Ru
ssia
Sin
gap
ore
Ch
ines
e Ta
ipei
Thai
lan
d
Un
ited
Sta
tes
Vie
t N
am
2016 2017 APEC GDP 2016 APEC GDP 2017
Steady consumption and positive net exports
support APEC growth
• While household consumption continues to be a consistent driver of growth in the region, trade provided
a solid contribution to APEC GDP growth in 2017.
Note: Data not available for China; and Papua New Guinea.
Sources: Economy sources and PSU staff calculations
Contribution to APEC Real GDP Growth (in%), 2017
-5
0
5
10
15
20
25
30
Au
stra
lia
Bru
nei
Dar
uss
alam
Can
ada
Ch
ile
Ho
ng
Ko
ng,
Ch
ina
Ind
on
esia
Jap
an
Ko
rea
Mal
aysi
a
Mex
ico
New
Ze
alan
d
Per
u
The
Ph
ilip
pin
es
Ru
ssia
Sin
gap
ore
Ch
ines
e Ta
ipei
Thai
lan
d
Un
ited
Sta
tes
Vie
t N
am
PCE GCE GFCF Change in Stocks Net Exports GDP
APEC growth tracks an upward trajectory on a
semi-annual basis
• APEC growth is derived largely from the ongoing global economic momentum which started in the
second half of 2016 and strengthened further in 2017.
Note: Semi-annual GDP growth is not available for Papua New Guinea.
Sources: Economy sources and PSU staff calculations
Real GDP Growth Rates, (y-o-y, in%), 1st half 2016-2nd half 2017
3.333.57
3.974.12
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
January-June 2016 July-December 2016 January-June 2017 July-December 2017
Solid recovery in merchandise trade, both in
terms of value and volume
• Growth in the value and volume of merchandise trade increased in 2017 compared to a year ago due to
the combined effect of stronger global demand and measures to address excess supply.
Note: APEC average growth rate does not include Brunei Darussalam and Papua New Guinea due to data unavailability.
Sources: WTO for trade values; UNCTAD Statistics for trade volume; and APEC PSU staff calculations.
Value of APEC Trade (y-o-y, in%), 2016 and 2017
-3.9 -3.5
10.2
11.7
-6
-4
-2
0
2
4
6
8
10
12
14
Merchandise Exports Merchandise Imports
2016 2017
Volume of APEC Trade (y-o-y, in%), 2016 and 2017
1.41.7
4.9
7.8
0
1
2
3
4
5
6
7
8
9
Merchandise Exports Merchandise Imports
2016 2017
Individual trade performance shows a general
reversal to growth among APEC economies
• The reversal to growth in both merchandise exports and imports in 2017 indicates renewed strength in
trade across the region.
Note: Data not available for Brunei Darussalam and Papua New Guinea.
Sources: WTO; Economy sources; and APEC PSU staff calculations.
Growth in the Value of Merchandise Exports
(y-o-y, in%), 2016 and 2017
Growth in the Value of Merchandise Imports
(y-o-y, in%), 2016 and 2017
-10
-5
0
5
10
15
20
25
30
Austr
alia
Ca
nad
a
Ch
ile
Ch
ina
Ho
ng K
on
g, C
hin
a
Indon
esia
Japa
n
Kore
a
Ma
laysia
Me
xic
o
Ne
w Z
eala
nd
Peru
The
Ph
ilip
pin
es
Ru
ssia
Sin
gapo
re
Ch
ine
se
Taip
ei
Tha
iland
Un
ite
d S
tate
s
Vie
t N
am
20162017APEC 2016 Average GrowthAPEC 2017 Average Growth
-20
-15
-10
-5
0
5
10
15
20
25
30
Austr
alia
Ca
nad
a
Ch
ile
Ch
ina
Ho
ng K
on
g, C
hin
a
Indon
esia
Japa
n
Kore
a
Ma
laysia
Me
xic
o
Ne
w Z
eala
nd
Peru
The
Ph
ilip
pin
es
Ru
ssia
Sin
gapo
re
Ch
ine
se
Taip
ei
Tha
iland
Un
ite
d S
tate
s
Vie
t N
am
2016
2017
APEC 2016 Average Growth
APEC 2017 Average Growth
Trade in commercial services also exhibits
positive turnaround
• Growth in exports and imports of commercial services increased in 2017 compared to 2016.
Note: Semi-annual GDP growth is not available for Brunei Darussalam and Papua New Guinea.
Sources: WTO; and APEC PSU staff calculations
Growth in the Value of Commercial Services, (y-o-y, in%), 2016 and 2017
0.7 0.9
5.65.9
0
1
2
3
4
5
6
7
Exports of Commercial Services Imports of Commercial Services
2016 2017
Economic strength is mirrored in industrial
production in the APEC region
• Industrial production remains generally strong in line with prevailing economic activity.
Note: Data coverage varies, but mostly as of Feb 2018.
Sources: Economy sources and The Economist Economic and Financial Indicators, accessed as of 10 April 2018
Industrial Production Index, latest available data
-10 -5 0 5 10 15 20 25 30
Australia
Canada
Chile
China
Hong Kong, China
Indonesia
Japan
Korea
Malaysia
Mexico
New Zealand
Peru
The Philippines
Russia
Singapore
Chinese Taipei
Thailand
United States
Viet Nam
As economic growth and trade post significant
increases, global FDI declines
• Preliminary data from UNCTAD revealed a 16.3-percent drop in global FDI inflows in 2017 to USD 1.52
trillion from USD 1.81 trillion in 2016.
• The bulk of the decline was attributed to the 27-percent fall in FDI flows to developed economies even as
inflows to developing economies increased slightly by 2.4 percent.
Source: UNCTAD Investment Monitor, January 2018.
Inflows of Foreign Direct Investments (FDI), (value in billion USD), 2016-2017
1814
1109
638
67
1518
810
653
55
0
200
400
600
800
1000
1200
1400
1600
1800
2000
World Developed Economies Developing Economies Transition Economies
2016 2017
Value of announced greenfield investments
declines markedly in 2017
• The 32-percent decline in 2017 from the 2016 level is cause for concern because greenfield investments
are good indicators of investors’ optimism about medium-term economic prospects since such projects
require transfer of resources, equipment, technology, and skills from the investor to the economy.
Source: UNCTAD Investment Monitor, January 2018.
Value of Announced Greenfield Investments (value in billion USD, y-o-y growth in %), 2016 and 2017
-60
-50
-40
-30
-20
-10
0
10
20
0
100
200
300
400
500
600
700
800
900
World Developed Economies Developing Economies Transition Economies
2016 2017 2017 y-o-y growth rate
Half of the top 10 FDI recipients in 2017 are
APEC economies
• Taken together, FDI inflows to the top APEC hosts amounted to USD 658 billion, equivalent to 43 percent
of global FDI in 2017.
Top 10 FDI hosts (value in billion USD), 2016 (left graph) and 2017 (right graph)
391
254
134
108
92
62
59
48
44
38
0 100 200 300 400 500
United States
United Kingdom
China
Hong Kong, China
Netherlands
Singapore
Brazil
Australia
India
Russia
311
144
85
68
66
60
60
58
50
45
0 50 100 150 200 250 300 350
United States
China
Hong Kong, China
Netherlands
Ireland
Australia
Brazil
Singapore
France
India
Source: UNCTAD Investment Monitor, January 2018.
APEC region is expected to continue along the
path of high economic growth in the near-term
• The APEC region is seen to continue to benefit from the positive feedback loop of:
increased strength in global economic activity → higher demand + increased consumer and
business confidence→ stronger consumption, investment, and trade activity.
Source: UNCTAD Investment Monitor, January 2018.
Short-term GDP Growth Projections (in %), 2018-2019
3.8 3.9 3.94.1 4.1 4.0
3.5 3.6 3.8
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2017 (actual) 2018f 2019f
World APEC Rest of the World
But uncertainty could tilt risks to the downside
in the medium term
• Risks are broadly balanced in the short-term: Downside risks relate mostly to policy missteps that could dampen confidence and
spending.
Key upside potential could come from a stronger-than-expected global economic
activity
Trade volume is expected to grow at a robust pace
• In the medium term, risks are tilted to the downside due to policy
uncertainty: Uncertainty in monetary, fiscal, and trade policies could dampen growth.
Financial market volatilities.
• Other factors: UK-EU relationship post-Brexit;
Ongoing geo-political tensions;
Terrorist attacks; and
Adverse weather conditions
Source: UNCTAD Investment Monitor, January 2018.
Trade protectionism and related tensions could
diminish current gains
• As of the latest WTO-OECD-UNCTAD monitoring reports on trade and investment measures:
Trade-restrictive measures outnumbered trade-facilitating measures
Investment-friendly measures outnumbered investment-restrictive measures
Trade Measures (as % of total)
31
52
4138
69
48
5962
0
10
20
30
40
50
60
70
80
mid-Oct 2015 tomid-May 2016
mid-May 2016 tomid-Oct 2016
mid-Oct 2016 tomid-May 2017
mid-May to mid-Oct 2017
Trade-facilitating measures Trade-restrictive measures
79
71
36
58
21
29
64
42
0
10
20
30
40
50
60
70
80
90
mid-Oct 2015 tomid-May 2016
mid-May 2016 tomid-Oct 2016
mid-Oct 2016 tomid-May 2017
mid-May to mid-Oct 2017
Investment-facilitating measures Investment-restrictive measures
Investment Measures (as % of total)
Note: Only nine of the 21 APEC member-economies belong to the G-20, including: Australia; Canada; China; Indonesia; Japan; Korea; Mexico; Russia; and the United States.
Sources: WTO Monitoring Report on G20 Measures; and UNCTAD-OECD Report on G20 Investment Measures
Global commodity prices are expected to trend
upwards in the near-term
• Stronger global demand and measures to curb excess supply have raised global commodity prices.
• In APEC, inflation averaged higher at 2.4% in 2017 from 2.1% in 2016.
• Commodity prices are expected to inch higher in the short-term in line with continued strength in the
global economy.
Commodity Price Indices (in real terms) APEC Average Inflation Rate
Sources: World Bank Commodity Markets for the commodity price indices; economy sources, the IMF WEO Database (October 2017), and PSU staff calculations for the APEC average inflation rate.
0
1
2
3
4
5
6
7
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
0
20
40
60
80
100
120
140
2010 2011 2012 2013 2014 2015 2016 2017
Energy Non-energy Agriculture Food Metals
Monetary policy: a delicate balance between
supporting growth and managing inflation
• As of mid-April 2018, monetary policy decisions across APEC have been largely neutral.
• The US monetary policy rate increased anew in March 2018, with clear signals of a gradual tightening in
view of a stronger US economy.
• Rising inflation combined with higher US interest rates could prompt a similar policy rate increase across
the world, which could impact on the ongoing global economic momentum.
Monetary Policy Rates (in %)
Note: Of the 21 APEC members, only 17 use interest rates as monetary policy instruments. Brunei Darussalam and Hong Kong, China maintain a currency board system; Japan uses a monetary base;
and Singapore uses an exchange rate policy band
0
2
4
6
8
10
12
Austr
alia
Cana
da
Ch
ile
Chin
a
Ind
one
sia
Kore
a
Ma
laysia
Me
xic
o
New
Ze
ala
nd
Pap
ua N
ew
Guin
ea
Peru
Th
e P
hili
ppin
es
Russia
Ch
inese
Taip
ei
Th
aila
nd
United
Sta
tes
Vie
t N
am
end-2016 end-2017 as of March-mid April 2018
Current buoyant economic conditions could be
sustained with parallel structural reform efforts
• Structural reforms that help promote and sustain trade and
investments by:
improving connectivity and bridging infrastructure gaps;
responding to challenges posed by the digital economy; and
increasing participation of all segments of society in well-
functioning, transparent and competitive markets.
• APEC is equipped with strategies and roadmaps towards
meaningful reforms that promote trade and investment, and
lead to sustainable and inclusive growth:
APEC Connectivity Blueprint 2015-2025;
Renewed APEC Agenda on Structural Reform (RAASR)
2016-2020; and the
APEC Framework on Human Resources Development in the
Digital Age.
• In 2020, a review of APEC’s achievements vis-à-vis the Bogor
Goals and RAASR commitments will be conducted. The
APEC Vision Group will help determine the role of APEC
post-2020.
Source: UNCTAD Investment Monitor, January 2018.
Trade, Policy, and the Pursuit of Inclusion
• APEC Leaders have called for more inclusion in the
region 2016 APEC Leaders Statement: benefits of trade and globalization
should be spread more equally
2017 APEC Action Agenda on Economic, Financial, and Social
Inclusion: inclusive APEC community by 2030
• Inclusion is often cited as a reason for protectionism Increase production at home
Protect local firms and industries
Protect jobs and raise workers’ income
“Bring back” jobs that were outsourced
Source: UNCTAD Investment Monitor, January 2018.
Trade, Policy, and the Pursuit of Inclusion
• Trade and globalisation can have
negative impacts Reduced employment in import-
competing sectors
Offshoring and automation
Declining labour share in GDP
• But protectionism is not
inclusion Imports are not negatively
correlated with employment at the
macro level
Good for jobs in protected industry;
bad for jobs elsewhere
Impacts: jobs losses and lower real
wages in non-protected sectors;
lower overall economic growth
Source: UNCTAD Investment Monitor, January 2018.
10
12
14
16
18
20
log
of nu
mbe
r e
mplo
ye
d
18 20 22 24 26 28log of real imports
bandwidth = .8
Imports and employment, 1991–2016
Trade, Policy, and the Pursuit of Inclusion
• What is inclusion? Everyone contributes; everyone benefits
Need to address factors that prevent people from developing their
capabilities and accessing economic opportunities
• What contributes to inclusion? Access to human capital development: skills, health
Access to opportunities: infrastructure, financial inclusion
Social inclusion policies: labour policies, social protection, fiscal
policies
Trade and regional integration: expand the set of available
opportunities
Source: UNCTAD Investment Monitor, January 2018.
Trade, Policy, and the Pursuit of Inclusion
• Addressing inclusion in trade
Trade adjustment policies: addressing behind-the-border issues
Labour standards: avoid a race to the bottom in wages and working
conditions; application of ILO labour standards
Environment: poor households are more vulnerable to, and less
able to cope with, the impacts of environmental damage and extreme
weather
Gender: non-discrimination and support for women workers
Minorities: promote greater involvement of indigenous groups and
minorities in trade
MSMEs: improving access to finance and fostering the use of e-
commerce
Source: UNCTAD Investment Monitor, January 2018.
Trade, Policy, and the Pursuit of Inclusion
• Policy pronouncements are good, but implementation is
better
Targeting and focusing of efforts
Complementarity of policies
Monitoring and evaluation
Accounting for local contexts
Sustainability
Source: UNCTAD Investment Monitor, January 2018.
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