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Asian Development Outlook 2019 Asian Development Outlook 2019 Towards a disaster-resilient Asia Strengthening Disaster Resilience Valerie Mercer-Blackman Senior Economist Economic Research and Regional Cooperation Department Asian Development Bank 2
Key Messages • Developing Asia’s growth to moderate to 5.7% in 2019 and 5.6% in 2020 amid weaker global demand and trade tensions • PRC moderation partly reflects efforts to control financial risks; India set to rebound as consumption strengthens • Inflation to remain subdued at 2.5% in 2019 and 2020 • The primary risk still centers on the trade conflict, with uncertainty heightened by protracted negotiations • Asia must strengthen its disaster resilience given growing risks posed by natural hazards 3
Developing Asia's growth is softening, as prospects in advanced economies dim GDP growth Developing Asia % Developing Asia excluding NIEs 8 2019 2020 2017 2018 GDP growth (%) ADO ADO Actual Actual forecast forecast 7 6.6 Major industrial 6.5 2.3 2.2 1.9 1.6 6.4 economies a 6.2 6.2 6.1 6.0 5.9 United States 2.2 2.9 2.4 1.9 6 5.7 5.6 2.5 1.8 1.5 1.5 Euro area Japan 1.9 0.8 0.8 0.6 5 2016 2017 2018 2019 2020 a Average growth rates are weighed by gross national income, Atlas method. Forecast NIEs = newly industrialized economies of Hong Kong, China; Republic of Korea; Singapore; and Sources: US Department of Commerce, Bureau of Economic Analysis, http://www.bea.gov; Eurostat, Taipei,China http://epp.eurostat.ec.europa.eu; Economic and Social Research Institute of Japan, Source: Asian Development Outlook 2019 database. http://www.esri.cao.go.jp; Consensus Forecasts; Bloomberg; CEIC Data Company; Haver Analytics; ADB estimates. 4
Global trade and activity slowed and trade tensions escalated… Global activity indicators PMI = purchasing managers’ index, PRC = People’s Republic of China, sa = seasonally adjusted, US = United States. 5 Sources: Haver Analytics; CEIC Data Company.
…which weighed on the region’s trade… Change in Nominal Exports Change in Nominal Imports Philippines Sri Lanka 2017 2018 2017 2018 Republic of Korea Pakistan Taipei,China Hong Kong, China Thailand Myanmar Sri Lanka Taipei,China Hong Kong, China Viet Nam Indonesia Republic of Korea Pakistan Malaysia India Thailand People's Rep. of China Singapore Armenia Kazakhstan Singapore India Bangladesh People's Rep. of China Nepal Georgia Myanmar Philippines Viet Nam Bangladesh Mongolia Indonesia Tajikistan Armenia Malaysia Cambodia Cambodia Tajikistan Brunei Darussalam Brunei Darussalam Georgia Nepal Kazakhstan Azerbaijan Azerbaijan Mongolia -10 0 10 20 30 40 50 -10 0 10 20 30 40 50 Sources: CEIC Data Company and Haver Analytics (accessed 11 March 2019). 6
…but domestic demand has supported the region’s growth Demand-side contribution to growth, selected economies Total consumption Total investments Net Exports GDP growth Percentage points 10 ASEAN-5 NIEs 8 6 4 2 0 -2 -4 2017 2018 fy2017 fy2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 PRC IND HKG KOR SIN TAP INO MAL PHI THA VIE fy = fiscal year Notes: ASEAN = Association of Southeast Asian Nations; HKG = Hong Kong, China, IND = India, INO = Indonesia, KOR = Republic of Korea, MAL = Malaysia, NIEs = newly industrialized economies, PHI = Philippines, PRC = People's Republic of China, SIN = Singapore, TAP = Taipei,China, THA = Thailand, VIE = Viet Nam. Components do not add up to total due to a statistical discrepancy. Data for India are in fiscal years which covers the period 1 April to 30 March. 7 Source: Haver Analytics (accessed 10 March 2019); ADB estimates.
Developing Asia’s more open sub -regions will see more of a slowdown in 2019 2018 2019 2020 2018 2019 2020 East Asia 6.0 5.7 5.5 South Asia 6.7 6.8 6.9 Hong Kong, China 3.0 2.5 2.5 Bangladesh 7.9 8.0 8.0 People's Republic of China 6.6 6.3 6.1 India 7.0 7.2 7.3 Republic of Korea 2.7 2.5 2.5 Pakistan 5.2 3.9 3.6 Taipei,China 2.6 2.2 2.0 Central Asia 4.4 4.2 4.2 Southeast Asia 5.1 4.9 5.0 Azerbaijan 1.4 2.5 2.7 Indonesia 5.2 5.2 5.3 Kazakhstan 4.1 3.5 3.3 Malaysia 4.7 4.5 4.7 Philippines 6.2 6.4 6.4 The Pacific 0.9 3.5 3.2 Singapore 3.2 2.6 2.6 Fiji 3.0 3.2 3.5 Thailand 4.1 3.9 3.7 Papua New Guinea 0.2 3.7 3.1 Viet Nam 7.1 6.8 6.7 Developing Asia 5.9 5.7 5.6 Excluding NIEs 6.4 6.2 6.1 Note: Red arrow= lower than the previous year. Green arrow = higher than the previous year. No sign = no change. 8 Source: Asian Development Outlook 2019 database .
PRC moderation reflects both structural factors and policy tightening Growth of broad money, total social financing, Supply-side contribution to growth bank loans, and shadow banking Services Industry Agriculture Gross domestic product Percentage points 10 9.0 7.3 8 6.9 6.7 6.8 6.6 6.3 6.1 6 4 2 0 2010-2013 2014 2015 2016 2017 2018 2019 2020 Forecast Sources: People’s Bank of China; ADB estimates. Source: National Bureau of Statistics. 9
Stable food and fuel prices to keep inflation in check Brent crude and food price Inflation and sub-regional contributions, developing Asia Index $/barrel 100 100 Central Asia East Asia Food price index (right scale) South Asia Southeast Asia % Food price forecast The Pacific Developing Asia 4 (ADO 2019) 10-year average (2009-2018): 3.2% 80 90 3 Food price index 2.5 2.5 2.4 2.5 (Annual average) 2.2 2.1 60 80 Brent Crude 2 Futures Price (12 February 2019) Brent Crude (Annual average) 1 40 70 Brent Crude Spot Price (left scale) 0 20 60 2015 2016 2017 2018 2019 2020 Forecast 2015 2016 2017 2018 2019 2020 Source: Asian Development Outlook 2019 database . Source: Bloomberg. 10
Risks remain tilted to the downside PRC: Trade Policy Uncertainty Index, 1995-2019 The greatest risk centers on Index prolonged US-PRC trade 100 tensions, which heighten 80 uncertainty US-PRC trade US-PRC trade tension tension over IPR Growth in the advanced 60 PRC WTO economies and the PRC accession 40 may slow by more than expected 20 Rapid Fed hike less likely, 0 but risk of financial Jan 1995 Jan 1998 Jan 2001 Jan 2004 Jan 2007 Jan 2010 Jan 2013 Jan 2016 Jan 2019 volatility remains Source: ADB staff estimates, based on methodology of Hlatshwayo (2018). 11
Under current scenario, early signs of redirection of production facilities to the rest of developing Asia. GDP impact of trade conflict by economic region FDI inflows to developing Asia, by source Direct and Indirect Effects Trade Redirection Effects GDP Impact Net Impact (Partial Redirection) 0.2 0.1 0.06 0.04 0.01 0.0 -0.1 -0.05 -0.13 -0.2 -0.25 -0.3 World PRC USA NIEs ASEAN-5 Rest of Asia NIEs = newly industrialized economies of Hong Kong, China; Republic of Korea; Singapore; and Taipei,China. Source: Staff calculations using data from fDi Markets (available: ASEAN-5 = Indonesia, Malaysia, Philippines, Thailand, and Viet Nam. Rest of Asia = Bangladesh, Bhutan, https://www.fdimarkets.com/), and Zephyr (available: https://www.bvdinfo.com). Brunei Darussalam, Cambodia, Fiji, India, Lao People's Democratic Republic, Maldives, Mongolia, Pakistan, and Sri Lanka. Source: ADB Staff estimates using data as of 2017 from FDI markets and Zephyr. 12 Source: ADB Staff estimates.
Theme Chapter: Strengthening Disaster Resilience V4.1 13
Asia is particularly susceptible to disaster risk …and disasters from natural hazards occur across the Four in five people affected by natural hazards live in Asia… region Disaster impacts in developing Asia by type (2000 – 2018) Highest death tolls from disasters in Asia since 1990 Asia’s Share in Global Total Source: EM-DAT 14
and disasters hit poor and small economies the hardest Average Annual Losses in Developing Asia % of exposed assets % of exposed 1.0 assets 1.0 0.8 0.8 0.8 0.6 0.6 0.6 0.4 0.4 0.2 0.3 0.2 0.2 0.2 0.2 0.1 0.2 0.1 0.0 0.0 Low Lower middle Upper middle High The Pacific Southeast South Asia Central Asia East Asia Asia By income By region Source: UNISDR 2015. 15
…so per -capita impact much stronger in the Pacific. Expected losses from earthquakes and tropical Disaster impacts normalized by GDP cyclones in the Pacific and population, 2000-2018
Disaster risks are rising because vulnerable populations are increasingly exposed to hazards… Hazards Direct Indirect Spillovers Time • Industrial shifts Mortality Foregone • Inter- Exposure generational economic Displacement activity Asset damage Space • Supply chains • Migration Vulnerability …so what is needed to reduce impact is strengthened disaster resilience 17
Three keys to strengthening disaster resilience: #1. Mainstream disaster risk reduction Humanitarian aid to Developing Asia Integrate disaster resilience into Preventive Responsive development and investment plans 100% (2015 Sendai Framework for 80% Disaster Risk Reduction DRR) 60% Increase spending on prevention 40% vs. response 20% Focus on preventive investments 0% 2002 2004 2006 2008 2010 2012 2014 2016 that can yield multiple dividends Source: OECD. Query Wizard for International Development Statistics. 18
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