Economic and Social Survey of Asia and the Pacific 2015: Year-end Update United Nations Conference Centre 14 January 2016 Dr. Shamshad Akhtar Under-Secretary-General of the United Nations and Executive Secretary of ESCAP
Key findings and messages • The Asia-Pacific region’s growth has plateaued around 5%. This has implications for its ability to drive global economic recovery; the region should focus more on domestic and regional demand to revive growth • While deceleration in extra-regional trade is an important factor, domestic demand and intra-regional trade also remains constrained • Key concern is impact on trade of slowdown in China and the recent volatility in equity and currency markets in the country and the region • Despite relatively lower inflation, monetary policy faces unenviable trade-offs. A more proactive fiscal policy stance is recommended to provide countercyclical support and strengthen long-term and inclusive growth • Key economic policy challenges include coping with rising private debt and higher financing costs due to US monetary policy normalization • Overarching medium-term priority is making growth more inclusive and strengthening productivity 2
Economic growth remains on a declining trend • Slowdown in global trade as well Real GDP growth in developing Asia and the Pacific, advanced 12 economies and the world, 2006-2016 as in Chinese economy together with domestic infrastructure 10 Year-on-year percentage change constraints is holding back faster 8 growth – Growth estimates for 2015 and 2016 6 downgraded from Survey 2015 – Growth seems to have plateaued 4 around 5% compared to an average 2 9.4% growth between 2005 – 2007. 0 • Declining growth trend in AP -2 region is in contrast to somewhat Developing Asia (current forecast) accelerating growth in adv. eco. Developing Asia (forecast as of Survey 2015) -4 Advanced economies – AP region is no longer the leader in World global economic recovery. -6 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 – Highlights that domestic and regional factors are gaining significance and focus on them is important for growth revival in the region 3
2016 Outlook: Selected Asia-Pacific economies Real GDP growth and inflation of selected Asia-Pacific economies Inflation Real GDP growth Latest Survey Latest Survey (Percentage) estimates 2015 estimates 2015 2014 2015 2016 2015 2016 2014 2015 2016 2015 2016 China 7.3 6.9 6.5 7.0 6.8 2.0 1.5 2.2 1.7 2.5 Fiji 5.3 4.0 3.5 4.0 4.0 0.5 2.0 3.0 2.5 2.5 India 7.3 7.4 7.5 8.1 8.2 6.0 5.0 5.5 5.5 5.8 Indonesia 5.0 4.8 5.3 5.6 5.8 6.4 6.6 5.3 5.5 5.0 Japan –0.1 0.5 1.1 0.6 0.8 2.7 0.8 0.7 1.0 2.2 Malaysia 6.0 4.8 4.8 4.9 5.2 3.1 2.4 3.3 3.0 2.9 Philippines 6.1 5.9 6.3 6.5 6.4 4.1 1.8 3.2 3.0 3.2 Republic of Korea 3.3 2.6 2.9 3.4 3.7 1.3 0.7 1.6 1.9 2.6 Russian Federation 0.6 –3.9 –0.5 –4.0 –1.6 7.8 15.7 9.0 13.0 10.0 Singapore 2.9 2.0 2.2 3.1 3.5 1.0 –0.5 0.5 0.3 1.5 Thailand 0.9 2.6 3.5 3.9 4.0 1.9 –0.8 1.5 0.3 2.0 Developing ESCAP economies 5.3 4.5 5.0 4.9 5.2 4.2 4.2 4.0 4.3 4.4 Least developed countries 5.6 5.7 6.0 5.7 5.8 6.4 5.3 5.4 5.5 5.4 Landlocked developing countires 4.9 2.9 3.4 3.2 3.9 5.7 6.2 6.8 7.1 6.9 Small island developing States 6.5 6.3 4.3 9.6 4.8 3.1 3.8 4.0 4.3 4.3 Total ESCAP 3.5 3.2 3.6 3.4 3.7 3.7 3.0 2.9 3.1 3.6 4
Slowdown in the Chinese economy continues Mostly due to China’s ongoing efforts, for the right reasons, to rebalance the • economy towards domestic demand, particularly consumption Share of (net) exports and investment is declining. • Industrial production has slowed due to both external and internal factors. • Lower demand by advanced economies for Chinese exports • Less demand for new projects due to higher supply from previous activity. • China growth contributions, by expenditure, 2005-2014 China slowdown in manufacturing and Industrial output, 2012-2015 55 13 15 54 12 10.6% 13 53 15.0% 11 11 11.5% 3.1% 52 Percentage change 9 1.3% 10 31.9% 43.7% 42.5% 1.4% Percentage 87.9% 46.2% 51 67.3% 7 Percentage 52.1% 9 41.6% 54.5% 49.3% 50 5 8 56.6% 45.8% 42.5% 58.2% 44.8% 48.1% 64.5% 57.1% 3 49 48.1% 50.7% 7 1 48 -8.6% -2.6% PMI (manufacturing) RHS -13.5% -45.1% 6 -1 47 Industrial production index -3 5 46 -5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 45 4 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Cosumption Investment Net exports Growth
Chinese slowdown having large spillovers to the region • Slowdown in domestic demand by China is impacting regional trade. – Most affected are commodity-exporters ( Indonesia) and manufacturing exporters (Singapore, Republic of Korea, Taiwan Province of China) • In 2015, it has impacted both the equity and currency markets in China as well as the region; as seen again in recent days. Growth of exports to China for selected Asia-Pacific economies, Equity market performance for China and selected economies, 2012-2015 2015-2016 10 160 Year-on-year percentage change Thailand 5 150 China India 0 140 Index January 2015 = 100 Indonesia Korea 130 -5 Singapore 120 -10 110 -15 100 -20 90 -25 80 2012 2013 2014 2015 01-Jan-15 01-Mar-15 01-May-15 01-Jul-15 01-Sep-15 01-Nov-15 01-Jan-16 Malaysia Thailand Republic of Korea Singapore Indonesia Japan Note: Data for 2015 is available up to November 2015. 6
Moderate recovery in advanced economies also affecting the region given its export-led growth orientation • Apart from slowing demand in China, Monthly export growth for selected AP economies, 2010-2015 slow recovery in advanced Indonesia 80 economies is affecting exporting Republic of Korea 60 economies in region directly … Russian Federation – Global trade in 2015 is expected to Thailand 40 show slowest expansion since 2009 Percentage change Singapore 20 • …and indirectly through re-exports from China. 0 – China has seen consecutive months -20 of export contraction over second half of 2015 -40 – This translates into less demand for products from the region for -60 Jan-2010 Mar-2010 May-2010 Jul-2010 Jan-2011 Mar-2011 May-2011 Jul-2011 Jan-2012 Mar-2012 May-2012 Jul-2012 Jan-2013 Mar-2013 May-2013 Jul-2013 Jan-2014 Mar-2014 May-2014 Jul-2014 Jan-2015 Mar-2015 May-2015 Jul-2015 Sep-2010 Nov-2010 Sep-2011 Nov-2011 Sep-2012 Nov-2012 Sep-2013 Nov-2013 Sep-2014 Nov-2014 Sep-2015 Nov-2015 processing and onward export by China 7
Domestic demand is also not growing in a robust manner • Consumption being affected in some economies due to rapid accumulation in private debt and relatively high inflation • Investment being affected by slow progress in reforms, a constrained private sector, and high economic uncertainty. Contributions of private consumption to economic growth in Contributions of fixed investment to economic growth in selected selected developing Asia-Pacific economies, 2012-2014 developing Asia-Pacific economies, 2012-2014 5 5 2012 2013 2014 2012 2013 2014 4 4 Percentage points 3 Percentage points 3 2 2 1 1 0 0 -1 -1 Malaysia Russian Indonesia Thailand Malaysia Russian Indonesia Thailand 8 Federation Federation
Slower economic activity coupled with lower commodity prices drive inflation downwards Inflation for developing Asia-Pacific region, 2009-2016 7 An important factor behind inflation • Year-on-year percentage change dynamics is the effect of commodity 6 imports/exports on exchange rates 5 For most commodity-importers, • 4 exchange rate impact is less pronounced due to lower 3 2009 2010 2011 2012 2013 2014 2015 2016 commodity prices Oil and commodity price trends, 2009-2015 lower imported inflation in South- • 230 120 East Asia and East and North East 210 All commodity price Index (2005 = 100) 110 Average crude price (USD per Barrel) 190 Asia 100 170 90 150 80 For commodity-exporters, there is • 130 70 higher exchange rate depreciation 110 All commodity price index (LHS) 60 90 Average crude price (RHS) due to low commodity prices. 50 70 higher imported inflation in North • 50 40 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 and Central Asia
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