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World Economic and Financial Surveys

Regional Economic Outlook:
Asia and Pacific

October 2009

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Asia has rebounded fast from the depth of the global crisis. Initially, the region was hit extremely hard, with output in most countries shrinking by much more than even those nations at the epicenter of the crisis. But starting in February 2009, Asia's economy began to revive. Exports and industrial production have increased again, financial pressures have eased, confidence has largely been restored. What explains this remarkable comeback? What challenges does the recovery pose to Asian policymakers? These are the main questions addressed in the IMF's October 2009 "Regional Economic Outlook: Asia and Pacific." The report discusses the latest developments in Asia, examines the prospects for the period ahead, and considers the policy steps needed to sustain the recovery and rebalance Asia's medium-term growth.

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Contents

Definitions
Executive Summary
I. Asia’s Recovery in the Global Context
What Has Been Driving Asia’s Recovery?
What Lies Ahead?
Key Policy Challenges
II. How Japan Recovered from Its Banking Crisis: Possible Lessons for Today
Japan’s Lost Decade: From Crisis to Recovery
How Does the Current Great Recession Compare with Japan’s Lost Decade?
Potential Implications for the Global Outlook and Policies
III. Corporate Savings and Rebalancing in Asia
Does Higher Corporate Saving Affect Household Behavior?
What Influences Corporate Savings in Asia?
The Policy Implications
Conclusion
Appendix 3.1. Corporate and Household Savings
Appendix 3.2. Regressions on the Determinants of Corporate Savings
References
Boxes
Chart Data 1.1 How Have Low-Income Countries in Asia Fared Amid the Global Crisis?
Chart Data 1.2 Fiscal Stimulus: Assessing Effectiveness and Sustainability
Chart Data 1.3 Monetary Transmission in Asia: Is It Working?
Chart Data 1.4 Capital Inflows and Policy Responses
Chart Data 1.5 Implications of the Global Crisis for Asia’s Potential Output
1.6 Economic Impact of Recent Natural Disasters in Asia
Chart Data 1.7 Exit from SME Support Measures
Chart Data 1.8 Global Shifts in Demand: Making Up for Weaker Consumption in the United States
Chart Data 1.9 Macro-Stabilization in Mongolia: An Emerging Success Story
Chart Data 3.1 Corporate Savings, Household Income, and Private Spending in Japan
Chart Data 3.2 Savings in China
Tables
1.1 Asia: Real GDP
2.1 Japan: Public Funds Allocated to the Financial Sector (1999–2008)
3A.1 Private and Corporate Savings
3A.2 Impact of Corporate Savings on Private Savings by Region: Sensitivity to Measures of Private Savings
3A.3 Private Consumption and Household Property and Nonproperty Income
3A.4 Difference in Mean Corporate Savings, Post-2000 versus Pre-2000
3A.5 Corporate Savings and Corporate Governance
3A.6 Results from Firm-Level Regression
Figures
Chart Data 1.1 Current Recession: Real GDP Growth
1.2 Assessing Global Growth Momentum
Chart Data 1.3 World Growth
Chart Data 1.4 World Trade and Asia’s Industrial Production
Chart Data 1.5 Selected Asia: Industrial Production and Contribution of Final External Demand to Total Value Added
Chart Data 1.6 Selected Asia: Real GDP Growth
1.7 Asia: Growth Momentum
Chart Data 1.8 Asia: Industrial Production during 2008–09
Chart Data 1.9 Selected Asia: Volume of Exports during 2008–09
Chart Data 1.10 Asia: Value of Exports during 2008–09
Chart Data 1.11 Asia: Electronics and Nonelectronics Exports
Chart Data 1.12 U.S. Retail IT Inventories and Asian Electronics Exports
Chart Data 1.13 Emerging Asia (excluding China): Direction of Exports
Chart Data 1.14 Discretionary Fiscal Measures, 2009
Chart Data 1.15 Composition of Fiscal Stimulus Measures, 2009
Chart Data 1.16 Asia: Fiscal Stimulus Implementation, 2009:H1
Chart Data 1.17 Asia Business Cycle: Nominal Policy Rates
Chart Data 1.18 Deposit Money Banks: Excess Reserves at Crisis Peak
Chart Data 1.19 Emerging Asia: Net Capital Inflows
Chart Data 1.20 Selected Asia: Portfolio Inflows and Change in Exchange Rates
Chart Data 1.21 Asia: Nominal Exchange Rate against U.S. Dollar
Chart Data 1.22 Stock Markets
Chart Data 1.23 Emerging Asia: External Bond Issuance by Sector and Rating
Chart Data 1.24 Selected Asia: TED Spread
Chart Data 1.25 Emerging Markets: Bank Credit to Private Sector
Chart Data 1.26 Selected Asia: Bank Capital-to-Asset Ratios
Chart Data 1.27 China: Credit and Fixed-Asset Investment
Chart Data 1.28 Asia Business Cycle: Real Private Consumption Expenditure
Chart Data 1.29 Asia Business Cycle: Employment
Chart Data 1.30 Asia: Consumer Confidence and Volume of Retail Sales
Chart Data 1.31 Japan and NIEs: Real Private Capital Formation
Chart Data 1.32 United States: Ratio of Imports to Retail Sales—Electric and Electronic Products and Parts
Chart Data 1.33 Selected Asia: Manufacturing Capacity Utilization
Chart Data 1.34 Asia: Output Gaps
Chart Data 1.35 Japan, China, and India: Contributions to Growth
Chart Data 1.36 Selected Asia: Contributions to Growth
Chart Data 1.37 Asia: Consumer Prices
Chart Data 1.38 Asia: Current Account Balances
Chart Data 1.39 Asia GDP Growth
1.40 Comparing Asia Now with Japan in the 1990s and Early 2000s
Chart Data 1.41 Property Prices
Chart Data 1.42 Fiscal Impulse in 2010
Chart Data 1.43 Asia: Difference Between Broad Money Growth and Nominal GDP Growth
Chart Data 1.44 Selected Asia: Contributions of Final External Demand to Total Value Added
Chart Data 1.45 Contributions to Growth in World Imports: Consumer Goods
Chart Data 1.46 Selected Asia: Private Savings—Changes in the Share of Household and Nonhousehold Savings in GDP
Chart Data 2.1 Phases in Japan’s Banking Crisis
Chart Data 2.2 Japan: Industrial Production and Unemployment
Chart Data 2.3 Japan: Fiscal Stimulus and Growth
Chart Data 2.4 Japan: Policy Rate and Stock Market Index
Chart Data 2.5 Japan: Nonperforming Loans
Chart Data 2.6 Japan: Bank Capital and Lending
Chart Data 2.7 Japan: “Triple Excesses” of the Corporate Sector
Chart Data 2.8 Japan: Contributions to GDP Growth
Chart Data 2.9 Japan: Corporate Leverage and Investment
Chart Data 2.10 Japan: Public Debt
Chart Data 2.11 Bank of Japan Assets
2.12 Recovery Heat Maps in Japan: Three Phases of the Banking Crisis
2.13 Recovery Heat Maps in Advanced Economies in 2009
Chart Data 2.14 Household Debt
Chart Data 2.15 Japan: Real GDP
Chart Data 3.1 Change in Savings since 2000
Chart Data 3.2 Difference in Mean Corporate Savings, Post-2000 versus Pre-2000
Chart Data 3.3 Non-Asian Emerging Markets: Savings
Chart Data 3.4 Emerging Asia (excluding China): Savings
Chart Data 3.5 Emerging Asia Corporate Savings
Chart Data 3.6 Leverage in Emerging Asia
Chart Data 3.7 Private and Corporate Savings
Chart Data 3.8 Household and Corporate Savings
Chart Data 3.9 Corporate Savings Offset by Households
Chart Data 3.10 Households: Consumption and Disposable Property Income
Chart Data 3.11 Marginal Propensities to Consume
Chart Data 3.12 Financial Reform, 2005
Chart Data 3.13 Corporate Governance Quality, 2008
Chart Data 3.14 The Effect of Financial Liberalization on Corporate Savings
Chart Data 3.15 The Effect of Corporate Governance Reform on Corporate Savings
Chart Data 3.16 Financial Reform since the Asian Crisis
Chart Data 3.17 Measure of Investor Protection in Asia