asia pacific economic outlook - deloitte méxico · india a “modi-fied” government by dr. rumki...

Asia Pacific Economic OutlookJuly 2014

ChinaIndiaIndonesiaPhilippines

CHINA’S economy continues to show signs of weakness, although there are also

signs of stabilization at a relatively modest level of growth. This is creating a dilemma for the government. On the one hand, it wants to maintain economic growth at a level that avoids social disruption. In the short term, this entails boosting credit market activity. On the other hand, the government wants to imple-ment long-term reforms aimed at creating sustainable growth that does not rely on exces-sive credit growth. That means restraining the growth of credit. What should it do? Currently the government is doing a little of both.

Easing restrictions

First, in order to maintain growth, the government is loosening the reins on banks in order to stimulate more lending by banks to the private sector. China’s banking regulator

has said that it will, once again, reduce the amount of reserves that some banks are required to hold with the central bank.1 This would be the third reduction in the required reserve ratio in the past three months. The idea is to stimulate more lending to small businesses and first-time home buyers at a time when the economy is slowing more than anticipated. This action is meant to boost credit market activity in general. Yet it fol-lows other measures designed to rein in credit market activity. Thus this measure is meant to boost formal bank lending, while the previous measures were meant to cut off-balance-sheet, or shadow banking, activity.

On the other hand, the World Bank recently criticized China’s current policy of boosting credit as detrimental to reform. It said that boosting credit market activity “may perpetu-ate China’s traditional growth model that relies on government-led investment fueled by credit

ChinaBalancing growth and reform

By Dr. Ira Kalish

2 | Asia Pacific Economic Outlook

expansion.” The World Bank said that “a policy focus on meeting growth targets could distract from pushing through the structural reforms intended to put long-term growth on a more stable footing. Delays in implementing coher-ent reforms could perpetuate resource misal-location, undermine the health of the banking system, threaten the debt sustainability of local governments, and increase the fiscal costs of reform.”2 Meanwhile President Xi Jinping said that fiscal and other reforms are urgently needed, but they must be carefully planned. He urged action but gave little detail. He alluded to the political difficulties of implementing reform when he said that reform involves “dif-ficult adjustment of interests.”3

Imposing restrictions

Actually, the government has taken action designed to avoid excessive credit growth. The Chinese government has ordered banks to restrict their interbank lending, mandating that such lending may not exceed one-third of a bank’s liabilities nor exceed half of a bank’s tier 1 capital. The idea is to put limits on the expansion of the shadow banking system, which relies heavily on interbank lending for short-term finance. The volume of interbank lending has increased dramatically in recent years. The problem is that, although this action will help to quell the growth of risky shadow banking, it may also have the effect of slow-ing credit growth and, therefore, growth of the economy. The central bank reports that, at the end of 2013, the outstanding volume of inter-bank loans was 21.5 trillion yuan ($3.45 tril-lion), compared with 6.2 trillion yuan in 2009.

Another problem is that efforts to suppress shadow banking have also created problems for formal banking. Indeed, for the 10th consecu-tive quarter, the volume of defaults on Chinese bank loans has increased. In the first quarter of 2014, the volume of bad loans increased the most since 2005. Nonperforming bank loans reached their highest percentage of total loans (1.04 percent) since September 2008. Still, it is

worth recalling that nonperforming loans were 15 percent of the total in 2005. Yet the recent figures only reflect the amount on the banks’ balance sheets. The large banks have consider-able informal exposure to off-balance-sheet trust companies that have loaned heavily to often-questionable projects. This shadow bank-ing system is where the trouble lies. The true exposure of the banks to bad loans is probably much higher than the reported numbers sug-gest. The increase in troubled loans has much to do with the government’s efforts to rein in the growth of credit. In the first quarter, the volume of new credit declined 9 percent from the previous quarter. In March the Chinese money supply grew at its slowest pace on record. This is why the government is now keen to boost bank lending.

The role of local government debt

One of China’s serious financial worries has been a spectacular rise in local government debt. Of course, it should be noted that local governments in China are not legally per-mitted to issue bonds or take on bank loans. However, they have been clever in exploiting loopholes in the law. Many have established off-balance-sheet financing vehicles that have issued bonds and borrowed from banks in order to fund infrastructure projects. When those projects have failed to generate sufficient returns to service the debts, governments have sold land to raise funds. The dramatic rise in the volume of local government debt has taken place in a rather opaque manner, without investors fully understanding the risks they face when purchasing local debt. Still, demand for such debt remains strong, probably because investors perceive an implicit obligation by the central government in Beijing to bail out troubled local governments or the banks that fund them.

Last month the government said that, in the near future, it will allow local govern-ments to issue bonds, with the hope that a

July 2014 | 3

secondary market for municipal debt will develop. Moreover, this market will be char-acterized by transparency with the release of prospectuses for investors. Beijing will place limits on the volume of debt that individual local governments can issue, and it will force the off-balance-sheet vehicles to be phased out. Initially this policy will apply to 10 large cities, including Beijing, Shanghai, Guangzhou, and Shenzhen. The government hopes that these actions will help local governments transi-tion toward more responsible and transparent fund raising.

The impacts of housing and inflation

There are two important factors that will, in part, determine the degree to which the government will feel comfortable in loosen-ing monetary policy. One is the state of the housing market, and the other is the rate of inflation.

First, it appears that China’s housing price bubble may be easing. The government reported that, in April, home prices rose in just 44 of 70 cities it surveys. This compared with 56 cities in March. The April figure was the lowest in a year-and-a-half. Prices were flat in 18 cities. The slowing of home price increases reflects the impact of the government’s efforts to cool the housing market. Indeed residential construction and sales of homes have abated, playing a role in the economic slowdown. In April sales of homes declined 18 percent from March. Recently the central bank urged banks to accelerate the origination of mortgages in

order to provide a boost to the housing market. The easing of prices should help to make home purchases more affordable to more households. In China’s big cities, prices barely moved in April. In Beijing prices were up 0.1 percent from March; in Shanghai prices were up 0.3 percent; in Hangzhou prices actually fell 0.7 percent. If the housing bubble can be eased gradually, the government will have less incen-tive to quickly suppress credit growth.

The other important factor is inflation, which has tumbled. In April consumer prices were up only 1.8 percent, the slowest rate of inflation in 18 months. Recall that a year ago inflation was running quite high. That was concern because it inhibited the central bank from easing monetary policy lest inflation get worse. Now, with inflation under control, the central bank has more room to maneuver, especially as there is concern that the economy may be growing more slowly than the gov-ernment’s target of 7.5 percent. Meanwhile, producer prices continue to fall, dropping 2.0 percent in April, the 26th consecutive month of decline. This reflects the considerable excess capacity in such industries as steel. Moreover, declining commodity prices, the result of weak Chinese demand, have contributed to falling producer prices and decelerating consumer prices. As to how far the central bank will go to ease policy, the issue now is whether the bank wants to strengthen growth at the risk of adding to excess credit market activity. Although the central bank needn’t worry now about inflation, it does have to balance con-cerns about growth with concerns about credit market risk.

Endnotes

1. Bloomberg News, “China details reserve ratio cut for regional lenders,” June 9, 2014, http://www.bloomberg.com/news/2014-06-09/china-s-central-bank-releases-details-of-reserve-ratio-reduction.html.

2. Bloomberg News, “China’s focus on growth goal risks reform delay, World Bank says,” June 6, 2014, http://www.bloomberg.com/news/2014-06-06/china-s-focus-on-growth-goal-risks-reform-delay-world-bank-says.html.

3. Reuters, “China’s Xi says fiscal reform urgent but needs planning: Xinhua,” June 6, 2014, http://www.reuters.com/article/2014/06/06/us-china-economy-reforms-idUSKBN0EH20720140606.


IndiaA “Modi-fied” government

By Dr. Rumki Majumdar

THE general election that concluded on May 16, 2014, turned out to be phenom-

enal. This election recorded the highest-ever voter turnout (551.3 million) and the highest-ever voter participation (66.4 percent), mark-ing it as the largest democratic election in the world’s history.1 It was also the most expensive in the history of independent India. The elec-tion outcome was surprising to many investors and civilians, who had expected a coalition government, which has become the norm in India for the last three decades. The Bharatiya Janata Party (BJP) emerged as the single largest party to get a majority in the Lok Sabha (lower house), and the first to get such a mandate since 1984. Narendra Modi, who led the party during the election and is considered to be the biggest reason for the historic won, has been sworn in as India’s prime minister.

The single-party majority has set the foun-dation for a stable central government for the

next five years. Political stability has signifi-cantly reduced downside risks to the economy. This has also raised hopes for both domestic and international investors, who are frustrated by policy inaction, slow growth, and inflation.

Voters’ demand

While winning the election with the largest mandate was an uphill task for the BJP this election, challenges that lie ahead for the new government will be equally big and will require adept leadership and economic manage-ment. For two consecutive years, the nation has endured growth of less than 5 percent and a loss of consumer and investor confi-dence. Those who voted for the BJP hoping for improved governance will now demand results.

Industrialists from different sectors have voiced their demands, especially around

July 2014 | 5

substantial reforms and clarity around policy making. Transparent and business-friendly tax policies and regulations, interest rate rational-ization, infrastructure development, transpar-ency and accountability in governance, and, last but not least, effective policy implementa-tion are the core demands from the business fraternity. These parameters will decide the ease of doing business in India, which, accord-ing to the World Economic Forum, has a poor ranking relative to other countries.2

On the other hand, consum-ers are fed up with persistently rising prices, especially of food articles. Unfortunately, infla-tion taxes the poor more than the rich and has contributed to a greater socio-economic divide in the last few years. In addition, poor job growth and skill mismatch have resulted in high unemployment and low wage growth. Poor job opportuni-ties in rural India and low agriculture income are resulting in rising migration to urban areas, which is ecologically and economically unsustainable. India suffers from poor infra-structure, which impacts most people’s daily lives. Safety is one of the greatest concerns, and health care remains a pressing issue.

During the general elections, the BJP prom-ised a change to Indian voters, who now want to see it. The Modi-led government now has to walk the talk.

Policy priorities and their impact

But this isn’t going to be easy in the face of current political roadblocks and economic challenges. Ensuring that political stability gets reflected in economic performance will be a

difficult process and will require the govern-ment to focus on a few key areas of improve-ment. Modi’s 10-point agenda is a good start on the path of economic reforms. The agenda prioritizes better governance, a strong manu-facturing sector, improved investment, and low inflation, among others.

The government has unveiled new poli-cies for sushaasan (good governance), aimed at reviving the decision-making process with

a clear vision and empowering its departments to take quick, efficient, and transparent deci-sions. Good gov-ernance will likely bring certainty in policy direction, which will remove impediments to higher growth. Processes and pro-cedures will likely get simplified so that there is “maxi-mum governance

with minimum government.” The government aims to revive the manu-

facturing sector, which has slipped into a recession thanks to poor policies and struc-tural bottlenecks. Most likely, the government will first clear pending projects by putting them on a fast-track mode and reviving inves-tor sentiments. The central government may work closely with state governments to tackle issues such as land acquisition and tariffs in the power structure, which are the biggest impediments to projects. Structural reforms, such as rolling out goods and services tax, and infrastructure improvement for industries may be other steps to boost the investment cycle in the economy.

A turnaround in the manufacturing sector will likely help generate economic growth and employment. The reversal of investment in the economy and effective implementation of

Processes and procedures will likely get simplified so that there is “maximum governance with minimum government.”


Endnotes

1. “Lok Sabha polls 2014: Country records highest voter turnout since independence,” Economic Times, May, 13, 2014.

2. Klaus Schwab, The global competitiveness report, 2013–2014 (full data edition), World Economic Forum, 2013.

3. Ministry of Finance, Department of Economic Affairs, Indian public finance statistics 2012–2013, July 2013, http://www.finmin.nic.in/reports/IPFStat201213.pdf; Ministry of Finance, Public debt management: Quarterly report, Janu-ary–March 2014, http://www.finmin.nic.in/reports/PDM4thQ201314.pdf.

4. Raghuram G. Rajan, Second bimonthly monetary policy statement, 2014–15, Reserve Bank of India, June 3, 2014.

policies will likely help contain the price rise, which has been persistently high primarily due to supply shortages and structural factors. Price stability will, in turn, boost growth.

The previous government had significantly deviated from the fiscal target mandated by the Fiscal Responsibility and Budget Management Act. Populist policies and high subsidies caused the gross fiscal deficit to spiral up from 1.27 trillion Indian rupees (2.5 percent of GDP) in FY 2007–08 to around 5.25 trillion rupees (4.6 percent of GDP) in FY 2013–14.3 The rising deficit has been a cause of worry for investors, which implies that fiscal consolida-tion will not be an option going forward. The government has proposed divesting public sec-tor undertakings and will likely suggest other prudent measures to check the fiscal balance without compromising on kick-starting invest-ments in infrastructure.

Economic scorecard

The economy expanded 4.6 percent year over year in Q4 of FY 2013–14, at an annual growth of 4.7 percent in FY 2013–14. This is

the second consecutive year during which the economy grew at a pace below 5 percent in the last decade. GDP annual growth in FY 2012–13 was a decade low of 4.5 percent. Growth in the agricultural sector spurred India’s economy this year. However, both manufacturing and mining industries contracted in FY 2013–14, while the construction sector performed poorly due to lackluster infrastructure.

Inflation is consistently trending down; wholesale price inflation was 5.2 percent in April 2014, and consumer price infla-tion (industrial worker) has been hovering at around 7 percent year over year in the last three months. However, consumer prices are still above the target range of the Reserve Bank of India. As a result, despite the fall, the bank decided to keep the policy rates unchanged in the second bimonthly monetary policy meet-ing since there is room for inflation rates to come down on a sustainable basis.4 However, the statutory liquidity ratio of scheduled commercial banks was cut by 50 basis points, which will likely improve bank lending to investments. In other words, the governor has signaled that growth will likely not suffer on account of lack of liquidity, though he will keep a close watch on inflation.

July 2014 | 7

INDONESIA, the world’s third-largest democ-racy and Asia’s fourth-largest economy, goes

to the polls in July to elect a new president. Voters, especially the youth, will be eager to exercise their franchise and thereby chart the future of an economy that has the advan-tage of favorable demographics, large natural resources, and strategic location in Asia. The new government has its task cut out. The economy has slowed, with GDP growth falling to 5.2 percent year over year in Q1 2014 from 5.7 percent in Q4 2013. Also, concerns regard-ing inflation, the Indonesian rupiah, and the current account have not gone away entirely despite commendable central bank action. To prop up medium- to long-term growth, the government will have to kick-start economic reforms amid a fragmented legislature, tackle corruption, upgrade infrastructure, and invest in human capital. After all, at stake is the future of about 250 million people.

Concerns on the exports front

The dip in GDP growth in Q1 2014 was primarily due to a 0.8 percent decline in real exports, which in turn was the result of a sharp decline in exports of crude oil and related products. Worryingly, the pressure on exports is not likely to ease soon given restrictions on key commodity exports such as palm oil, nickel, copper, and coal. The measures include a ban on exports of raw mineral ores, restric-tions on foreign investments in mining, hikes in export tariffs, and domestic quotas.

Slowing commodity prices in 2014 have not helped nominal export values either. For example, coal prices have fallen 15 percent, and palm oil prices are down 8 percent. In such a scenario, investments in mineral ore processing—the primary aim of the ban on raw ore exports—are not likely to materialize. Also adding to commodity export woes is slowing

IndonesiaChallenges before a new government

By Akrur Barua


growth in China, a key export market. No wonder then that Bank Indonesia (BI) slashed its total exports growth forecast for 2014 to a mere 1.5–1.9 percent from an earlier figure of 8.1–8.5 percent.

Consumer optimism continues

Consumers continue to remain positive, buoyed by healthy economic prospects and the specter of declining inflation in the second half of the year. In fact, BI’s consumer confidence survey revealed greater optimism in May than in April.1 Meanwhile, in Nielsen’s survey of consumers in the Asia Pacific region in Q1 2014, Indonesians came out the most positive for the fifth straight quarter.2 This was evident from GDP figures as well, with consumer expenditure growth surging to 5.6 percent in Q1 from 5.3 percent in Q4 2013. The festival season in June and July is expected to add to

consumer spending growth in the near term. Consumers are also likely to enjoy greater real income gains in the second half of 2014 due to slowing inflation; BI expects inflation to fall within its target range (3.5–5.5 percent) by the end of the year. With interest rates not likely to go up, consumer expenditure is likely to grow by 5.1–5.6 percent this year, close to last year’s figure of 5.3 percent.

Positive mood among businesses as well

Business activity has also been healthy this year, with manufacturing growth holding steady and fixed investment growth edging

up to 5.1 percent in Q1 2014 from 4.4 percent in the previous quarter. Key indicators point to further improvements this quarter; for example, the country’s manufacturing purchas-ing managers’ index touched its highest level in May on the back of surging new orders. Businesses confidence is set to improve further in the near term as price pressures ease, the current account improves, and currency risks subside. The reduction in rupiah volatility is likely to aid foreign direct investments as well. The only damper will be mining, although it will not be enough to push fixed investment growth below 5 percent this year. Interestingly, negotiations between the government and foreign copper miners might lead to a resump-tion in copper mining activity soon and bring in investments in smelters as well. This could prompt the new government to follow a more pragmatic path in the sector.

Monetary policy: A job well done

Between June and November 2013, BI went on a monetary tightening spree, rais-ing the policy rate by a cumulative 175 basis points to counter high inflation and a fall in the currency. The latter was primarily a result of the uncertainty surrounding the US Federal Reserve’s (Fed’s) asset purchases program; Indonesia’s high current account deficit did not help either. A falling rupiah in turn added to inflationary pressures, which had already gone up in mid-2013 due to cuts in fuel subsidies.

BI’s tough response seems to be bearing fruit. Inflation has eased by nearly one per-centage point since January, although, at 7.3 percent in May, it is still above BI’s target range of 3.5–5.5 percent for 2014. Inflation is set for a steeper fall in the second half of 2014, with a high base coming into play from July; this will likely negate the impact of last year’s fuel price spikes.

The current account has also improved; the deficit is estimated to have fallen to 2.1 percent of GDP in Q1 2014 from 3.3 percent of GDP in

BI’s tough response seems to be bearing fruit.

July 2014 | 9

2013. This, along with Fed tapering by markets, has benefitted the rupiah, which has gained about 3 percent against the US dollar this year. However, this uptick is not a secular trend, especially without strong reforms and better fiscal management. Consequently, BI is not likely to deviate from its current tight policy stance this year; it kept rates on hold for the sixth straight month in May.

Agenda for the new government

The new government needs to start with a credible economic agenda to tackle both short-term uncertainty and increase long-term growth. First, it needs to spruce up infrastruc-ture, a move that will require reforms in infra-structure financing as well. Second, regulations

need to be eased. It has to be made easier for both foreign and domestic companies to set up business in the country. Currently, Indonesia ranks a poor 120 among 189 countries in the World Bank’s ease-of-doing-business rankings. Third, to benefit from a young and growing population, Indonesia will have to enhance productivity through investments in education, research, and skills. To do this, the govern-ment will have to partner with the private sector, including global players. Finally, the government will have to rationalize its sub-sidy regime by reducing price distortions and focus instead on direct transfers to the poor. Implementing all of these will not be easy, but they are essential if Indonesia wants to regain the momentum that propelled it into the G20. Otherwise, the tag of “fragile five” might stick to it a while longer.

Endnotes

1. “Indonesians increasingly optimistic on economy in May: Central bank survey,” Business Times, May 2014.

2. Nielsen, “Indonesia continues to lead consumer confidence in Asia-Pacific and around the world,” May 2014.


IN 2013 the Philippines’ economy grew 7.2 percent, the second highest pace of growth in

Asia after China. The momentum has contin-ued into this year, with personal consumption and investments set to remain strong. Buoyed by economic prospects, foreign investors who had moved away from emerging economies in 2013 have started flocking back to the coun-try, thereby strengthening equity markets and the Philippine peso. Then in May came a sovereign rating upgrade by Standard & Poor’s (S&P), pretty much summing up the country’s economic fortunes.1

Markets cheer amid strong growth and S&P approval

In May, S&P raised its sovereign rating for the Philippines by one notch to BBB with “stable” outlook. The rating major focused on

a strong current account (3.5 percent of GDP in 2013), stable government finances (budget deficit at 1.4 percent of GDP and gross govern-ment debt at 49 percent of GDP), and positive growth prospects. S&P’s latest move comes about a year after it and other rating majors had upgraded the Philippines to investment grade. Not surprisingly, the rating upgrade has buoyed markets, already on a strong upward streak this year due to positive economic data.

Global investors, who had pulled out of emerging economies in 2013 due to uncer-tainty over the US Federal Reserve’s (Fed’s) quantitative easing program, appear to be flocking back to the Philippines. They have bought shares worth about $959 million since December 2013.2 This has aided equity mar-kets; the Philippines Stock Exchange Index has gained about 15 percent this year. In the coming months, some correction in equities

PhilippinesThe good times continue

By Akrur Barua

July 2014 | 11

is expected due to current high valuations (about 21 times reported earnings).3 However, it is likely to be only a minor blip in a broad upward trend.

Peso not a worry, nor are external balances

The impact of foreign capital inflows has been felt on the peso. The currency has gained about 3 percent against the US dollar so far, reversing from a 7 percent decline last year when emerging market currencies were bat-tered by Fed tapering. But, even in 2013, the peso fared better than emerging-market peers such as India, Indonesia, and Turkey due to better growth prospects, fiscal health, and external balances. Domestic fundamentals are likely to remain favorable for the peso this year, while lower global risk will reduce volatility.

The fiscal deficit could deteriorate a bit owing to spending on reconstruction after Typhoon Haiyan; however, the deficit increase will likely be marginal. On the external front, rising investments—both public and private—will prop up imports this year, though they will not be enough to push the current account surplus below 3 percent of GDP. Moreover, external balances will benefit from continued expansion of services exports (business process outsourcing), greater tourist numbers, and rising remittances. The last has already gone up 6 percent (in US dollar terms) so far this year, continuing from a 7.4 percent rise in 2013.

Amid rising inflation, central bank will hike rates

Currently, the main concern of Bangko Sentral ng Pilipinas (BSP) is inflation, which is being driven by rising food prices. The latter is the result of reduced food supplies due to Typhoon Haiyan and relatively drier weather. In May headline inflation rose to 4.5 percent, the highest since November 2011; food infla-tion hit a five-year high of 6.7 percent. BSP will be wary that high food inflation could force

headline inflation beyond its 3–5 percent target range and could also percolate into core infla-tion; the latter edged up to 3.1 percent in May from 2.9 percent in April.

BSP will also be concerned about high liquidity, courtesy a long period of low inter-est rates. Broad money (M2) growth is still high (34 percent year over year in April), and the central bank wants to limit it to about 15–17 percent this year.4 To mop up liquid-ity, the central bank has already hiked reserve requirements twice this year (by two percent-age points in all) and is expected to raise its key policy rate. Starting with its next policy meet in July, BSP will likely hike rates twice this year, amounting to a total of 50–75 basis points. However, it is aware that any aggressive tightening could strengthen the peso, thereby denting export competitiveness.

BSP’s hawkish stance will not dent growth

Despite expectations of higher interest rates, both consumer and business sentiment in the country continue to remain positive. Consumers are likely to benefit from continued economic growth, upward movement in asset prices, and rising remittances. Meanwhile, exports and fixed capital investment have been going up; while growth in the former went up to 12.6 percent in Q1 2014 from 3.6 percent in Q4 2013, the latter improved to 11.2 percent from 8.0 percent during this period. Exports will continue to benefit from growing demand from Japan and the United States, two key export destinations.

As demand rises amid high capacity utiliza-tion, private businesses will likely spend more on new machinery and equipment. Fixed capital investments will also receive a boost as the government embarks on reconstruction activity; reconstruction costs (set over four years) have been estimated at $8.5 billion. This infrastructure push is in addition to a num-ber of public-private partnerships (PPPs) that the government is keen to implement to raise


The government needs to complement its infrastructure plan with a similar one for human capital and technology.

infrastructure spending to 5 percent of GDP (which is also the average for Southeast Asia) by 2016 from 3 percent in 2012.

Government should focus more on potential growth

Overall, economic growth will likely be in the range of 6.3–6.8 percent in 2014. This is despite a dip in growth in Q1 to 5.7 percent, blamed on delayed reconstruction activity. It is important for the government to not focus a lot on the short term nor deviate from its long-term objective of enhancing productivity. It has made a start by earmarking infrastruc-ture investments worth about $17 billion for

PPPs until 2016. However, implementation is a worry, as was seen in the legal wran-gles surrounding the Cebu International Airport project.

The government needs to complement its infrastructure plan with a similar one for human capital and technology. Already the government is planning to help private busi-nesses move up the value chain. It should, however, focus more on small and medium enterprises, a sector that tends to create more jobs. Enhancing technology and management techniques in the sector will not only help businesses become competitive, it will also help generate the jobs required to lessen unemploy-ment and poverty in the country.

Endnotes

1. Bloomberg, “Philippines wins S&P upgrade as Acquino’s changes seen enduring,” May 2014.

2. Bloomberg, “Biggest Philippine money managers brace for stock slump,” May 2014.

3. Bloomberg, “Philippines stocks head for bull market on growth outlook,” May 2014; Bloomberg, “Biggest Philippine money managers brace for stock slump.”

4. Reuters, “Philippine c.bank keeps rate steady, hikes reserve requirement again,” CNBC, May 2014; Bloomberg, “Philippines raises reserve ratio, keeps key rate unchanged,” May 2014.

July 2014 | 13

United States Economic ForecastVolume 1 Issue 2 March 2014

Global Economic Outlook2nd Quarter 2014

Additional resources

Deloitte Research thought leadershipGlobal Economic Outlook, Q2 2014: Eurozone, China, United States, Japan, India, Russia, Brazil, United Kingdom

United States Economic Forecast, Volume 1, Issue 2

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Contact information

Dr. Ira Kalish is chief global economist of Deloitte Touche Tohmatsu Limited.

Dr. Rumki Majumdar is a macroeconomist and a manager at Deloitte Research, Deloitte Services LP.

Akrur Barua is an economist and a manager at Deloitte Research, Deloitte Services LP.

About the authors

Global Economics TeamAditi RaoDeloitte Research Deloitte Services LPIndia Tel: +1 615 209 3941E-mail: [email protected]

Dr. Ira KalishDeloitte Touche Tohmatsu LimitedUSATel: +1.213.688.4765E-mail: [email protected]

Dr. Rumki MajumdarDeloitte Research Deloitte Services LPIndiaTel: +1 615 209 4090E-mail: [email protected]

Akrur BaruaDeloitte Research Deloitte Services LP IndiaTel: +1 678 299 9766E-mail: [email protected]

Navya KumarDeloitte Research Deloitte Services LPIndiaTel: +1 678 299 7123E-mail: [email protected]

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July 2014 | 17

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