Global Recession And Its Impact On The Asian Economy

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Dr. Bernardo M. Villegas is a renowned economist. A PhD in Economics from Harvard, he is referred to as "Professor of Boom"!!

The presentation predicts the influence of ASEAN power!

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Global Recession And Its Impact On The Asian Economy

  1. 1. Global Recession and Its Impact on the Asian Economy Dr. Bernardo M. Villegas November 2008
  2. 2. Black Thursday 1929 <ul><li>Stock Market Crash </li></ul><ul><li>Passive Federal Reserve System </li></ul><ul><li>Ignorance of Keynesian Pump Priming </li></ul><ul><li>Panic in the Banking Sector </li></ul><ul><li>Unemployment Rate of 25% </li></ul><ul><li>Complete Dominance of the US Economy in the World </li></ul><ul><li>World Financial Market Illiquid </li></ul>
  3. 3. Black Monday 2008 <ul><li>Real Estate Bubble </li></ul><ul><li>Proactive Federal Reserve System </li></ul><ul><li>US Government Pump Priming </li></ul><ul><li>No Panic in the Banking Sector </li></ul><ul><li>No Crash in the Stock Market </li></ul><ul><li>Unemployment Rate Manageable </li></ul><ul><li>Countervailing Power of Emerging Markets </li></ul><ul><li>Liquidity of Sovereign Funds </li></ul><ul><li>Massive intervention of European governments </li></ul>
  4. 4. Growth Rates of Major Economies F – forecasts Source: World Economic Outlook, IMF, Oct 2008 Traditional Engines of Growth
  5. 5. World Growth (GDP Growth Rates) F – forecasts Source: World Economic Outlook, IMF, Oct 2008 Traditional Engines of Growth
  6. 6. Global Growth Slowdown <ul><li>Financial meltdown in the U.S. </li></ul><ul><li>High rates of inflation </li></ul><ul><li>Tight credit despite lower interest rate </li></ul><ul><li>High albeit moderating food and fuel prices </li></ul><ul><li>Slowdown in the EU and Japan </li></ul><ul><li>The U.S. twin (fiscal and trade) deficits continue to cause concern </li></ul>Threats to World Growth
  7. 7. U.S. Economy: Still no end to financial turmoil <ul><li>Huge losses in the financial sector </li></ul><ul><li>Still uncertain results of U.S. government bailouts of failing banks </li></ul><ul><li>Previously robust private consumption spending has been depressed by the slump in the housing market </li></ul><ul><li>Real GDP growth to fall from 2.0% in 2007 to 1.6% or lower in 2008 </li></ul>
  8. 8. Euro Area Economy <ul><li>Activity in Western Europe gathered momentum in 2006. GDP growth in the Euro area reached 2.8%, double its pace in 2005 </li></ul><ul><li>Slowing of growth in 2008 to 1.3% from 2.6% in 2007 </li></ul><ul><li>Falling housing investments </li></ul><ul><li>Growth should remain relatively stronger in Germany sustained by good export performance in the face of weaker consumer demand </li></ul><ul><li>The slowdown will reflect an uptick in unemployment in the Euro area, especially in Spain </li></ul>
  9. 9. Japanese Economy <ul><li>Political instability caused by successive resignations of two Prime Ministers </li></ul><ul><li>Despite a stronger than expected GDP outturn in the first quarter of 2008, Japan’s economic outlook is weak for 2008 and 2009. </li></ul><ul><li>The yen weakened against the U.S. dollar in June but may strengthen if U.S. economy continues to be troubled by financial crisis. </li></ul><ul><li>Consumer prices will rise in 2008 </li></ul><ul><li>Reserves may be used to help ailing banks in the Asian region </li></ul>
  10. 10. World’s Largest Economies
  11. 11. GDP Growth Rates Asian Financial Crisis Source: ADB Key Indicators 2002
  12. 12. GDP Growth Rates Asia: The Most Dynamic Region
  13. 13. Emerging Engines of Growth BRICA
  14. 14. Emerging Engines of Growth The Next Eleven
  15. 15. Emerging Engines of Growth GDP % Change
  16. 16. <ul><li>Overheating economy: possible credit and stock market bubble </li></ul><ul><li>Inflation rate reached 6.5% in October 2007, the highest monthly inflation in 11 years </li></ul><ul><li>Efforts to cool down economy may result in hard landing </li></ul><ul><li>Underdeveloped banking sector </li></ul><ul><li>Undervalued currency </li></ul><ul><li>Uncontrolled local officials </li></ul><ul><li>Shortage of local entrepreneurs and managers </li></ul><ul><li>High rates of poverty </li></ul><ul><li>Stricter regulations in IT </li></ul>Threats in China BRICA
  17. 17. Opportunities in China <ul><li>GDP growth of 8% or over for the last two decades </li></ul><ul><li>Domestic market of some 250-300 million high-income consumers </li></ul><ul><li>High rate of investment at 50% of GDP </li></ul><ul><li>Foreign direct investments (FDIs) of US$60 billion or more yearly </li></ul><ul><li>Surging raw material demand </li></ul><ul><li>Greater integration of China and other Asian countries (e.g. ASEAN + China) </li></ul><ul><li>Demand for middle managers </li></ul>BRICA
  18. 18. ASEAN GDP Growth Rates and Per Capita Income BRICA
  19. 19. Domestic Markets Source: ADB Key Indicators 2007 BRICA
  20. 20. Savings and Capital Formation Source: ADB Key Indicators 2007 BRICA
  21. 21. Asian Economic Trends 2008-2010 <ul><li>Domestic markets as engines of growth: double track strategy </li></ul><ul><li>China as engine of growth of the Asia Pacific region </li></ul><ul><li>The predominance of China in manufacturing </li></ul><ul><li>Growth in intra-regional trade: increased complementarity </li></ul><ul><li>Continuing battle against mass poverty in the big economies </li></ul><ul><li>Outsourcing of manufacturing and services to Asia </li></ul><ul><li>Outsourcing is intra-company as well as inter-country </li></ul><ul><li>Focus on agricultural productivity in Southeast Asia </li></ul><ul><li>The emergence of SMEs and microenterprises </li></ul><ul><li>The “entrepreneurial challenge” to centrally planned economies </li></ul><ul><li>The challenge of innovations and productivity </li></ul>
  22. 22. Consumer Trends in Asia <ul><li>Non-income consumption factors </li></ul><ul><li>Expanding middle class </li></ul><ul><li>Diversity of consumer tastes and lifestyles </li></ul><ul><li>“ Mallification” of Asian cities </li></ul><ul><li>Demographic gift stage in South and Southeast Asia </li></ul><ul><li>Rapid aging in Northeast Asia and Singapore </li></ul><ul><li>Widespread use of English </li></ul><ul><li>The telecom revolution </li></ul><ul><li>Spread of university education </li></ul>
  23. 23. Selected Sunrise Industries in Asia <ul><li>Agribusiness </li></ul><ul><li>Mining </li></ul><ul><li>Triple Ts: Transport, Telecom, and Tourism </li></ul><ul><li>Infrastructures </li></ul><ul><li>Automobiles </li></ul><ul><li>Consumer durables </li></ul><ul><li>IT-enabled and IT services </li></ul><ul><li>Logistics and retailing </li></ul><ul><li>Health care and medical tourism </li></ul><ul><li>Education </li></ul><ul><li>Construction and real estate </li></ul><ul><li>Four Fs: Food, Fashion, Furniture, Fun </li></ul>
  24. 24. Global Recession and Its Impact on the Asian Economy Thank you.

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