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Dr razeen sally Dr razeen sally Presentation Transcript

  • THE EMERGING GLOBALECONOMY AND ITS IMPACT ON ASIA Razeen Sally
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012• Shift to the East- Sharp divergence of economic performance after GFC- Accelerates long-run convergence of emerging markets, especially in Asia, on West- Projections to 2030- Policy outlook: Western pessimism, Asian optimism – but growth slowdown this year
  • GDP Since the Crisis
  • Share of Global GDP for Asia and ROW Share of Global GDP per World Region 90 Asia 80 Rest of the World 70 60 50 40 30 20 10 0 1820 1870 1913 1950 1973 1998 2001 2030(Million 1990 international $) Source: Maddison and OECD
  • Share of Global GDP for parts of Asia Share of Global GDP per World Region 35 Other Asia 30 Japan China 25 India 20 15 10 5 0 1820 1870 1913 1950 1973 1998 2001 2030(Million 1990 international $) Source: Maddison and OECD
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012• Caveats to Asian optimism-- Short-term: - Global/emerging-market growth slowdown - Growth fuelled by big increase in bank credit-- Medium-term: - Stalled reforms - Repressed business climates and weak institutions - Still coupled to the West
  • World Ranking in Ease of Doing Business – Top 10 (2013) Ease of Starting Dealing with Trading Getting Registering Getting Protecting Paying Enforcing Resolving Doing a Construction Across Electricity Property Credit Investors Taxes Contract Insolvency Business Business Permits BordersSingapore 1 4 2 5 36 12 2 5 1 12 2 Hong 2 6 1 4 60 4 3 4 2 10 17 Kong New 3 1 6 32 2 4 1 21 25 17 13Zealand United 4 13 17 19 25 4 6 69 22 6 16 StatesDenmark 5 33 8 14 6 23 32 13 4 34 10Norway 6 43 23 14 7 70 25 19 21 4 3 United 7 19 20 62 73 1 10 16 14 21 8Kingdom South 8 24 26 33 65 12 49 30 3 2 14 KoreaGeorgia 9 7 3 50 1 4 19 33 38 30 81Australia 10 2 11 36 37 4 70 48 44 15 18
  • World Ranking in Ease of Doing Business (2013) Ease of Starting Dealing with Trading Getting Registering Getting Protecting Paying Enforcing Resolving Doing a Construction Across Electricity Property Credit Investors Taxes Contract Insolvency Business Business Permits Borders Singapore 1 4 2 5 36 12 2 5 1 12 2Hong Kong 2 6 1 4 60 4 3 4 2 10 17 Japan 24 114 72 27 64 23 19 127 19 35 1South Korea 8 24 26 3 75 12 49 30 3 2 14 Taiwan 16 16 9 6 32 70 32 54 23 90 15 Malaysia 12 54 96 28 33 1 4 15 11 33 49 Thailand 18 85 16 10 26 70 13 96 20 23 58 Brunei 79 135 43 29 115 129 117 22 40 158 46 Vietnam 99 108 28 155 48 40 169 138 74 44 149 Indonesia 128 166 75 147 98 129 49 131 37 144 148Philippines 138 161 100 57 122 129 128 143 53 111 165Cambodia 133 175 149 132 115 53 82 66 118 142 152 Laos 163 81 87 138 74 167 184 126 160 114 185 Myanmar n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a China 91 151 181 114 44 70 100 122 68 19 82 Sri Lanka 81 33 112 103 143 70 49 169 56 133 51 Pakistan 107 98 105 171 126 70 32 162 85 155 78 Nepal 108 105 97 96 21 70 82 114 171 137 121Bangladesh 129 95 83 185 175 83 25 97 119 182 119 India 132 173 182 105 94 23 49 152 127 184 116
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012 USA - Obama administration: interventionism at home; ambivalence on trade; domestic weakness cramps external leadership - Weak recovery this year; low growth prospects - The “fiscal cliff” and business uncertainty - Deadlock and polarisation in US politics
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012• USA (cont.)- Reasons for optimism:a) Structural transformations in the US economy - Energy revolution (fracking and shale) - Manufacturing revolution (advanced materials) - US MNEs, services and the Asian middle classb) The US political system - Vigorous debate on policy choices - Fluid, flexible elites (the “revolving door”) - Decentralised government and competitive experiments
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012• USA (cont.)- Good prospects for an American economic renaissance- And for the revival of American leadership in the world- Robust US engagement in Asia on security and economic issues
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012• EU-- Flat growth and back into recession-- Crisis aftermath: Single Market under stress; internally divided and externally weak-- Eurosclerosis – but pockets of good performers-- Euro crisis: a triple crisis of sovereign debt, banking and the currency-- Half-baked solutions followed by attempts at strong policy centralisation
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012• EU (cont.)- Why I think the euro will fail: a) Insufficient “firepower” b) Centralised rules will be weak political compromises c) Unrealistic politics- Consequences of a euro break-up for Asia- Future of the EU and its role in Asia
  • The official debtexplosion despitethe Maastricht Treatyceiling of 60%Debt/GDP
  • THE TRUE DEBT OF EUROPE (Official + Pension + Health + Welfare; as % of GNP) Greece 875% France 549% Portugal 492% United Kingdom 442% Germany 418% Ireland 405% Italy 364% Spain 244%Source: Jagadeesh Gokhale, Measuring theUnfunded Obligations of European CountriesPolicy Report No. 23 January 2009, National EU 25 434%Center for Policy Analysis
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012 China - Now one of Big 3; a China-centred Asia - Enormous external opening 1990s-mid 2000s; border barriers low, but still high non-border barriers - Recent policy slippage: stalled reforms and industrial- policy activism; translates into trade protectionism and conflict - Supercharged stimulus: macroeconomic dangers; reinforces public sector at expense of private sector and MNEs
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012-- Good news: current-account surplus narrowed sharply andreal exchange rate has appreciated-- Bad news: structural distortions in the economy gettingworse: over-saving, over-investment, under-consumption;demographics; declining productivity-- Need for second-generation reforms – factor markets as wellas product markets (land, labour, capital)-- But much more difficult: vested interests at heart of PartyState-- 2012: growth slowdown; Bo Xilai affair; mini-reforms oncurrency, FDI and financial markets; leadership change
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012• China (cont.)- Policy scenarios under new leadership a) Conservative retreat b) Liberal reform c) Muddle through – most likely
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012• China (cont.)- Prospects for next decade: growth slowdown, possible mini-crash- Increasing conflict between market economy/middle- class society and unreformed political system- China more aggressive in Asia, but unlikely to exercise true global and regional leadership
  • China: components of GDP
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012• Other Asia- Japan, South Korea Taiwan- Hong Kong and Singapore- ASEAN countries- India and South Asia
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012• Take-aways- “No such thing as Asia” – rather low-income, middle- income and high-income Asia a) Great potential for “catch-up” growth in low-income Asia; must get policy basics right b) But bigger challenges for middle- and high-income Asia to deliver innovation-based growth; requires complex structural and institutional reforms c) Enduring weaknesses in economic institutions and political systems
  • GLOBAL ECONOMY, EMERGING MARKETS, ASIA 2012• Take-aways (cont.)- Stronger US engagement in Asia; US companies at the heart of supply chains- Contingency plan needed to deal with external consequences of euro break-up- External consequences of mounting domestic political and economic problems in China