Asia and Pacific Region

Asia and Pacific: Building on Asia's Strengths during Turbulent Times

April 2016

APD REO

Growth in the Asia-Pacific economies is expected to decelerate slightly to about 5.3 percent during 2016–17, according to the latest Regional Economic Outlook for Asia and Pacific, published on May 3, 2016. While Asia remains the engine of the global economy, the moderation in regional growth reflects the sluggish global recovery and slowing global trade. As external demand remains relatively subdued and global financial conditions have started to tighten, domestic demand is expected to be a major driver of activity across most of the region. The report finds that policy settings are appropriate across most of the region, but implementing structural reforms is critical to bolstering potential growth and reducing potential vulnerabilities. The report also covers China’s spillovers to Asia, implications of China’s rebalancing for trade, and inequality in the region.

World Economic Outlook, October 2014

Contents

Front Matter

Chapter 1. Building on Asia’s Strengths during Turbulent Times

  • Recent Developments and Near-Term Outlook
  • Risks to the Outlook: Downside Risks are Looming Large
  • Policy Recommendations

Chapter 2. Navigating the Transition: Trade and Financial Spillovers from China

  • Introduction and Main Findings
  • Channels of Spillovers from China’s Growth Slowdown
  • Trade Spillovers from China’s Rebalancing
  • China’s Financial Spillovers to Regional Markets
  • Policy Implications
  • Annexes

Chapter 3. China’s Evolving Trade with Advanced Upstream Economies and Commodity Exporters

  • Introduction and Main Findings
  • Conclusion
  • Annex

Chapter 4. Sharing the Growth Dividend: Analysis of Inequality in Asia

  • Introduction and Main Findings
  • Recent Trends and Developments
  • Drivers of Income Inequality
  • Conclusions and Policy
  • Annex

References

Boxes

Chart Data 1.1 Housing Sector Developments in Australia and New Zealand: Diverging Tales
Chart Data 1.2 Household Debt in Korea: The Role of Structural Factors and Rising House Prices
Chart Data 1.3 U.S. Monetary Policy Uncertainty: What Have Been Its Effects on Asian Currencies?
Chart Data 1.4 Japan’s Sluggish Wages: Causes and Remedies
Chart Data 1.5 Paris Agreement on Climate Change and Asia-Pacific Countries
Chart Data 1.6 Cyclone Winston in Fiji
Chart Data 1.7 Rise in Services Trade: Looking Beyond Cross-Border Services
Chart Data 2.1 Regional Consequences of a Growth Slowdown in China
Chart Data 2.2 China’s Import Slowdown
Chart Data 2.3 China Opening Up: The Evolution of Financial Linkages
Chart Data 3.1 The Evolution of China’s Labor-Intensive Exports
Chart Data 3.2 Food Consumption Patterns in China
Chart Data 3.3 The Contribution of China’s Growth Transition to Commodity Price Declines
Chart Data 4.1 Understanding Rising Inequality in China and India
Chart Data 4.2 What Explains Declining Inequality in Malaysia, the Philippines, and Thailand?
Chart Data 4.3 Labor Share and Income Inequality

Tables

1.1 Asia: Real GDP
1.2 Asia: General Government Balances
1.3 Asia: Current Account Balance
1.4 Asia: Consumer Prices
3.1 World Consumption of Selected Major Commodities, 2011–15

Figures

Chart Data 1.1 United States: Financial Conditions
Chart Data 1.2 Global Commodity Prices
Chart Data 1.3 Market Volatility
Chart Data 1.4 Asia: Cumulative Portfolio Flows
Chart Data 1.5 Asia: Equity Prices and Price-to-Earnings (PE) Ratios
Chart Data 1.6 Asia: Ten-Year Sovereign Bond Yields: Change since End-June 2015
Chart Data 1.7 Sovereign Credit Default Swap Spreads
Chart Data 1.8 Selected Asia: Exchange Rates
Chart Data 1.9 Selected Asia: Foreign Exchange Reserve Accumulation
Chart Data 1.10 Selected Asia: Real Private Sector Credit Growth
Chart Data 1.11 Asia: Nonfinancial Corporate Sector Debt Issuance
Chart Data 1.12 Consolidated Foreign Claims
Chart Data 1.13 Asia: Financial Stability Heat Map
Chart Data 1.14 Ratio of Regulatory Tier 1 Capital to Risk-Weighted Assets
Chart Data 1.15 Return on Assets
Chart Data 1.16 Ratio of Nonperforming Loans to Total Gross Loans
Chart Data 1.17 Asia: Changes in Real GDP at Market Prices
Chart Data 1.18 Selected Asia: Exports to Major Destinations
Chart Data 1.19 Selected Asia: Retail Sales Volumes
Chart Data 1.20 Asia: Headline Inflation and Expectations
Chart Data 1.21 Selected Asia: Core Inflation
Chart Data 1.22 Asia: Current Account Balances
Chart Data 1.23 Selected Asia: Contributions to Projected Growth
Chart Data 1.24 Indicator Model for Asia: Projected versus Actual Real GDP Growth
Chart Data 1.25 Gordon Equity Price Model for Asia: Projected versus Actual Real GDP Growth
Chart Data 1.26 Asia: Output Gap versus Credit Gap
Chart Data 1.27 Selected Asia: Real Policy Rates
Chart Data 1.28 Estimated Central Bank Reaction Functions
Chart Data 1.29 Selected Asia: Cyclically Adjusted Fiscal Balance
Chart Data 1.30 China: Economic Activity Indicators
Chart Data 1.31 China: Daily Exchange Rate
Chart Data 1.32 China: Three-Month Implied Currency Volatility and Risk Reversal
Chart Data 1.33 United States: Interest Rates
Chart Data 1.34 Japan: Equity Prices and Exchange Rate
Chart Data 1.35 Low-Income Economies: Current Account and Fiscal Balances
Chart Data 1.36 Natural Disaster Risks: World Risk Index, 2014, Top 16
Chart Data 1.37 Asia: Resistance Index
Chart Data 1.38 Asia: Exchange Market Pressure Index (EMPI)
Chart Data 2.1 China’s Role in the Global Economy
Chart Data 2.2 Recent Developments in Global Trade and Asian Financial Markets
Chart Data 2.3 Channels of Spillovers from a Slowdown in China
Chart Data 2.4 Share of Domestic Value Added Exported from China’s Final Demand
Chart Data 2.5 A Tale of Two Exporters to China, 1995–2011
Chart Data 2.6 Change in Value-Added Exports to China after China’s Rebalancing
Chart Data 2.7 Estimated Impact of China Rebalancing on Partner-Country Growth Transmitted Through the Trade Channel
Chart Data 2.8 Impact of Historical Rebalancing on GDP Growth
Chart Data 2.9 Impact on GDP Growth Over the Medium Term: By Region
Chart Data 2.10 Asian Market Correlations with China, Japan, and the United States
Chart Data 2.11 Asia: Business Cycle Synchronization with China
Chart Data 2.12 Regional Equity and Foreign Exchange Markets during China-Related Shocks
Chart Data 2.13 Event Study: Stock Market Movements Due to Shocks from China
Chart Data 2.14 Event Study: Stock Market Movements Due to Shocks from China, by Trade Links with China
Chart Data 2.15 Event Study: Exchange Rate Movements Due to Shocks from China
Chart Data 2.16 Event Study: Exchange Rate Movements Due to Shocks from china, by Trade Links with China
Chart Data 2.17 Equity Market Spillover
Chart Data 2.18 Determinants of Market Sensitivity to China and Japan
Chart Data 2.19 Contribution to Explained Variance in Market Sensitivities to China
Chart Data 2.20 Scenario Analysis: Transmission of Shocks
Chart Data 2.21 Asian Market Sensitivity to China under Different Scenarios
Chart Data 3.1 Import Intensity of GDP Components, 2011
Chart Data 3.2 Consumption Imports
Chart Data 3.3 China: Consumption Imports
Chart Data 3.4 Real Commodity Import Growth
Chart Data 3.5 Domestic Value Added in Exports
Chart Data 3.6 Processing Trade
Chart Data 3.7 Import Intensity
Chart Data 3.8 Exports of LCD Screens and Transistors
Chart Data 3.9 Trade Balance with China by Technology Sophistication
Chart Data 3.10 Trade Balance with China by End-Use Category
Chart Data 3.11 China: Commodity Consumption and Production
Chart Data 3.12 China: Deviations of Actual Consumption from Counterfactual
Chart Data 3.13 Commodity Production in China: Deviation of Actual from Counterfactual
Chart Data 3.14 China: Contribution to Changes in Net Commodity Imports, 2011–15
Chart Data 3.15 Commodity Exports to China from Latin America and Asia and China’s Import Volumes from Latin America and Asia
Chart Data 4.1 World and Asia: Income Inequality
Chart Data 4.2 World and Asia: Population Weighted Income Inequality
Chart Data 4.3 Regional Comparison: Income Inequality Level
Chart Data 4.4 Regional Comparison: Income Inequality Trend
Chart Data 4.5 Asia: GDP per Capita and Net Gini Index
Chart Data 4.6 Selected Asia: Net Gini Index
Chart Data 4.7 Asia: Top 10 Income Share
Chart Data 4.8 Selected Asia: Growth of Income Share by Decile
Chart Data 4.9 Asia: Growth in Mean Income/Consumption by Decile
Chart Data 4.10 Poverty in Asia
Chart Data 4.11 Decomposition of Changes in Headcount Ratio
Chart Data 4.12 The Middle Class in Asia
Chart Data 4.13 Education by Wealth Quintile
Chart Data 4.14 Health by Wealth Quintile
Chart Data 4.15 Financial Services by Income Share in 2014
Chart Data 4.16 Nonregular Employment by Type in 2013
Chart Data 4.17 Nonagricultural Informal Employment
Chart Data 4.18 Advanced versus Emerging Market and Developing Economies
Chart Data 4.19 Asia: Financial Deepening
Chart Data 4.20 Population with Bank Accounts in 2014
Chart Data 4.21 Asia: Fiscal Policy
Chart Data 4.22 Composition of Social Spending
Chart Data 4.23 Pension Receipt Rate
Chart Data 4.24 Asia: Skill Premium
Chart Data 4.25 Regional Comparison: Return to Schooling Rate