Download Current Situation and Outlook of Asia and the Pacific Key message

Current Situation and Outlook of
Asia and the Pacific
Dr. Aynul Hasan, Chief, DPS, MPDD
Dr. M. Hussain Malik, Chief, MPAS, MPDD
High-level Policy Dialogue
Macroeconomic Policies for Sustainable and Resilient Growth
in North and Central Asia
27-28 August 2013, Almaty
Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Key message
• Global economic outlook remains uncertain.
Asia-Pacific region continues to drive global
growth. However, beyond the short-term
growth-stability nexus, policymakers should
be forward-looking and create synergy
among various economic, social and
environmental goals. This is also true for
North and Central Asia, where economic
diversification remains a major challenge.
2
Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Global economic outlook
•
Euro area: Short-term systemic risks have fallen, but with limited impact on real
economic activity. Unemployment remains high in crisis countries.
•
United States: Recovery continues despite sequestration. Unwinding of QE
could increase financial volatility and financing costs worldwide.
•
BRICS: Growth momentum has weakened notably, amid subdued external
demand as well as significant domestic structural challenges.
Real GDP growth, y-y, 2011Q1-2013Q2
10
Japan
8
United States
6
Euro area
4
Brazil
2
China
0
India
‐2
Russian Federation
‐4
South Africa
1
Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Global economic outlook
•
Commodity prices: After significant ups and downs, both food and fuel prices
seem to have stabilized since 2011. Despite some softening, prices are high
compared to historical levels. US EIA projects that energy consumption will grow
by 56% between 2010 and 2040, lead by 90% increase in non-OECD countries.
Global food and fuel price indices, Jan. 2007- July 2013
140
250
120
200
100
150
80
60
100
40
50
FAO food price index (LHS)
Brent crude index (RHS)
0
0
1/2007
4/2007
7/2007
10/2007
1/2008
4/2008
7/2008
10/2008
1/2009
4/2009
7/2009
10/2009
1/2010
4/2010
7/2010
10/2010
1/2011
4/2011
7/2011
10/2011
1/2012
4/2012
7/2012
10/2012
1/2013
4/2013
7/2013
1
20
Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Asia and the Pacific
•
After growth moderation in 2012 and 2013, soft rebound expected in 2014.
But an uncertain global environment continues to impact the region through trade
and financial channels. China’s slowdown is also affecting the rest of Asia.
•
Still the most dynamic region in the world economy.
Real GDP growth in ESCAP subregions, 2010-2014
10
9
8
7
6
5
4
3
2
1
0
Developing ESCAP economies East and North‐East Asia (excl Japan)
North and Central Asia
Pacific
South and South‐West Asia
2010
2011
2012
2013 e
2014 f
South‐East Asia
1
Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Asia and the Pacific
•
Growth moderation in 2013: China 7.5%, India 5.0%, Indonesia 5.8%
•
Exceptions: Kazakhstan 6.0%, North and Central Asia excl Russia 6.4%
China
India
Indonesia
Japan
Malaysia
Mongolia
Republic of Korea
Turkey
Armenia
Azerbaijan
Georgia
Kazakhstan
Kyrgyzstan
Russian Federation
Tajikistan
Turkmenistan
Uzbekistan
North and Central Asia
North and Central Asia (excluding Russian Federation)
Developing Asia-Pacific
1
Real GDP growth
2011
2012
2013
9.2
7.8
7.5
6.2
5.0
5.0
6.5
6.2
5.8
-0.6
2.0
2.0
5.1
5.6
5.0
17.3
12.3
9.4
3.6
2.0
2.8
8.6
2.2
3.4
4.7
0.1
7.0
7.5
5.7
4.3
7.4
14.7
8.3
4.7
6.9
6.9
7.2
2.2
6.1
5.0
-0.9
3.4
7.5
11.1
8.2
3.7
5.6
5.4
5.6
4.8
4.0
6.0
6.0
2.4
6.0
12.2
7.3
3.0
6.4
5.3
2011
5.4
8.4
5.4
-0.3
3.2
9.2
4.0
6.5
Inflation
2012
2.6
10.4
4.3
0.0
1.7
14.3
2.2
8.9
2013
2.5
10.8
8.0
0.1
2.2
10.9
1.7
5.3
7.8
8.1
8.5
8.3
16.9
8.4
12.5
12.0
12.8
8.6
9.5
6.5
2.4
1.1
-0.9
5.1
2.8
5.1
5.8
8.5
13.2
5.2
5.4
5.2
5.6
3.3
-0.8
5.9
6.8
6.2
6.8
9.0
12.6
6.2
6.4
5.0
Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Policy challenge 1:
Uncertain global environment
60
• Fiscal challenges + policy
uncertainties in Euro area, U.S.
Merchandise export growth, y‐y, % change, 2008Q1‐2013Q1
50
40
30
20
10
0
‐10
‐20
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
Impact on Asia-Pacific
 Lower export growth, decreased
economic activity
 Estimated regional GDP loss of
3% since the onset of the global
crisis five years ago - $870 billion
‐30
World Asia
CIS
‐40
‐50
• Loose monetary policies, QE of
developed economies
Impact on Asia-Pacific
 Short-term capital flows
volatility
 Rapid short-term currency
appreciation
7
Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Policy challenge 2:
Regional slowdown + rebalancing
•
•
80
60
40
20
0
‐20
‐40
8
China is the largest individual export market for the rest of Asia, particularly
for intermediate goods. Slowdown in China’s output and export growth
could negatively affect the region.
But a ‘rebalancing China’ could also benefit the region, particularly exporters
of consumer goods, through increased penetration in the Chinese market.
ESCAP estimates some $13 billion gain over 2013-2015.
Monthly export growth in China, by custom type,
Jan. 2010 - July 2013
Impact of China rebalancing in export growth
of Asian countries, average during 2013-2015
Exports: Ordinary Trade
Exports: Processing and Assembling
Exports: Processing with Imported Materials
Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Policy challenge 3:
Economic insecurity
•
High incidence of low-quality, informal
sector jobs: Nearly 1.1 billion of the region’s
workforce, especially women and youth.
•
Youth employment slightly edging up in
2013: 13.4% in South-East Asia and the
Pacific, 10% in South Asia, 9.8% in East Asia.
•
Inadequate social security: Less than 2%
of GDP in many countries.
Share of population living in poverty (bar, LHS) and income inequality (line, RHS), early 1990s and latest available year
9
Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Policy challenge 4:
Infrastructure deficit
•
Impediment to growth, especially in South Asia,
Pacific islands and LDCs (Afghanistan, Cambodia,
Myanmar). Power is the most critical bottleneck
and then transportation. Financing requirement:
$600 billion to $800 billion per year.
•
In North and Central Asia, national infrastructure is
relatively well developed (amid considerable crosscountry differences), but regional infrastructure
development and connectivity are vital given that
several countries are landlocked.
Po p u latio n w ith o u t electr icity acc ess
P ap ua Ne w G uine a
M y anm ar
S o lo m o n Is land
A fg hanis tan
V anuatu
Tim o r-Le s te
Cam b o d ia
K o re a, De m Re p
B ang lad e s h
Ne p al
Lao P DR
P ak is tan
Ind o ne s ia
M o ng o lia
B hutan
Ind ia
S ri Lank a
Fiji
P hilip p ine s
S am o a
V ie t Nam
Iran, Is lam ic Re p
Thailand
M alay s ia
China
B rune i Darus s alam
M ald iv e s
K o re a, Re p
0
10
20
40
60
80
100
Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Policy challenge 5:
Economic diversification
•
A major challenge particularly in North
and Central Asia, which has become
more exposed to commodity-related
risks than it had been a decade ago.
Concentration of oil, gas, metal and
minerals in total exports increased or
remains high in the past decade.
•
More important than the short-term
impact is the long-term implications of
limited diversification.
•
Governments should focus on sectors
with high spillover effect on the economy.
When considering the most appropriate
path for diversification, it is also useful
to get a sense of how products are
related.
11
Forward-looking Macroeconomic Policies for Inclusive and Sustainable Development
Policy challenge 6:
Labour migration
50
30
20
40
12
It is essential to strengthen social safety
nets for migrant workers, generate
employment opportunities at home and
formulate regionally coordinated
migration policies and laws.
20
10
0
Old age dependency ratio
2010
2050
Kazakhstan
Russia
Azerbaijan
50
Georgia
0
Armenia
10
30
•
Migrant remittance flows as a share of GDP, 2010, %
40
Kyrgyzstan
A popular notion of migrant workers
taking away jobs or lowering wages does
not have strong empirical foundations.
Studies show significant benefits to
host countries, including through lower
prices that consumers pay as larger
supply of goods and services is made
available. By this measure, economic
contribution of migration workers are
some 0.13% of GDP ($2.5 billion) per
year in Russia and 0.57% of GDP ($1.1
billion) in Kazakhstan.
Tajikistan
•
Thank you!
Macroeconomic Policy and Development Division (MPDD), ESCAP
Visit us at www.unescap.org/pdd