Asia and Pacific
Asia and Pacific: Sustaining the Momentum: Vigilance and Reforms
April 2014
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April 2014
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©2014 International Monetary Fund
The five Regional Economic Outlooks published biannually by the IMF cover Asia and Pacific, Europe, the Middle East and Central Asia, Sub-Saharan Africa, and the Western Hemisphere. In each volume, recent economic developments and prospects for the region are discussed as a whole, as well as for specific countries. The reports include key data for countries in the region. Each report focuses on policy developments that have affected economic performance in the region, and discusses key challenges faced by policymakers. The near-term outlook, key risks, and their related policy challenges are analyzed throughout the reports, and current issues are explored, such as when and how to withdraw public interventions in financial systems globally while maintaining a still-fragile economic recovery. These indispensable surveys are the product of comprehensive intradepartmental reviews of economic developments that draw primarily on information the IMF staff gathers through consultation with member countries.
| Contents | ||
| Definitions | Executive Summary | |
| I. Asia’s Momentum Is Set to Continue (See the infographics) | ||
| Introduction and Main Findings | ||
| Recent Developments: Steady Growth Amid Financial Volatility | ||
| Regional Outlook: Growth Should Remain Robust and Inflation Generally Low | ||
| Theme 1: Preparing for the Risks Ahead | ||
| Theme 2: Abenomics—Temporary Stimulus or a Break with the Past? | ||
| Theme 3: How Will China’s Reforms Shape China and Asia? | ||
| Theme 4: What Is Happening to Growth in ASEAN? | ||
| II. Corporate Leverage in Asia: A Fault Line? | ||
| Introduction and Main Findings | ||
| The Facts: How Leveraged Are Asian Firms? | ||
| The Risks: What Are the Characteristics of Asia’s Highly Leveraged Firms? | ||
| The Implications for Growth: Is Leverage a Constraint on Investment? | ||
| The Bottom Line | ||
| III. Does Growing Regional Integration Make Asian Economies Move More in Sync? (See the infographic) | ||
| Introduction and Main Findings | ||
| Is Activity Moving More in Sync in Asia? | ||
| The Role of Trade Integration | ||
| The Role of Financial Integration | ||
| The Role of Synchronized Macroeconomic Policies | ||
| The Role of Spillovers from China | ||
| Implications for the Future | ||
| IV. Macroprudential Policy and Capital Flow Measures in Asia: Use and Effectiveness (See the infographic) | ||
| Introduction and Main Findings | ||
| Asia’s Use of Macroprudential and Capital Flow Measures | ||
| The Impact of Macroprudential and Capital Flow Management Policies in Asia | ||
| The Use of Macroprudential Policies As the Tide Flows Out | ||
| References | ||
| Boxes | |||
| Chart | Data | 1.1 | Are Capital Flows and Global Risk Aversion Driving Asset Prices in Asia? |
| Chart | Data | 1.2 | Have Capital Inflows Boosted Credit in Asia? |
| Table | 1.3 | Productivity Growth and Production Structure: The Role of Trade Diversification and Services | |
| Chart | Data | 1.4 | Motives for Foreign Direct Investment in Asia |
| Chart | Data | 1.5 | Successful Abenomics: Good for Japan, Good for Asia |
| Chart | Data | 2.1 | Rising Household Debt and House Prices in Asia: Are Household Balance Sheets at Risk? |
| Table | 3.1 | Assessing the Drivers of Business Cycle Synchronization and Spillovers | |
| Chart | Data | 3.2 | Pacific Island Countries: Regional Integration and Growth Spillovers |
| 4.1 | The Macroprudential Toolkit | ||
| Chart | Data | 4.2 | Foreign-Exchange-Related Macroprudential Policy in Korea |
| Chart | Data | 4.3 | Countercyclical Capital Requirements Amid Capital Flows Volatility: Possible Benefits for Asia |
| Chart | Data | 4.4 | Macroprudential Policies and House Prices in Hong Kong SAR and Singapore |
| Tables | |||
| 1.1 | Asia: Real GDP | ||
| Figures | |||
| Chart | Data | 1.1 | Asia: Equity and Bond Funds—Quarterly Net Flows During 2010–14 |
| Chart | Data | 1.2 | Selected Asia: Foreign Exchange Reserve Accumulation |
| Chart | Data | 1.3 | Selected Asia: Private Sector Credit Growth |
| Chart | Data | 1.4 | Asia: Stock Markets |
| Chart | Data | 1.5 | Consolidated Foreign Claims |
| Chart | Data | 1.6 | Asia: Changes in Real GDP at Market Prices |
| Chart | Data | 1.7 | Selected Asia: Exports to Major Destination |
| Chart | Data | 1.8 | Selected Asia: Retail Sales Volumes |
| Chart | Data | 1.9 | Asia: Headline Inflation |
| Chart | Data | 1.10 | Asia: Contributions to Change in Headline Inflation in 2013 |
| Chart | Data | 1.11 | Asia: Current Account Balances |
| Chart | Data | 1.12 | Selected Asia: Contributions to Projected Growth |
| Chart | Data | 1.13 | Indicator Model for Asia: Projected Versus Actual Real GDP Growth |
| Chart | Data | 1.14 | Gordon Equity Price Model for Asia: Projected Versus Actual Real GDP Growth |
| Chart | Data | 1.15 | Asia: Headline Consumer Price Inflation |
| Chart | Data | 1.16 | Asia: Estimated Central Bank Reaction Functions |
| Chart | Data | 1.17 | Selected Asia: Cyclically Adjusted Fiscal Balance |
| Chart | Data | 1.18 | Current Account and Real Credit Growth |
| Chart | Data | 1.19 | Asia Financial Stability Heat Map |
| Chart | Data | 1.20 | Debt-to-Equity Ratio |
| Chart | Data | 1.21 | Selected Asia: Return on Bank Assets |
| Chart | Data | 1.22 | Selected Asia: Tier 1 Capital Ratio |
| Chart | Data | 1.23 | Selected Asia: Liquidity Ratio |
| Chart | Data | 1.24 | Selected Asia: Nonperforming Loans Ratio |
| Chart | Data | 1.25 | Impact of a Combined 1 Percent U.S. Growth and 100 Basis Points Interest Rate Shock on Asia |
| Chart | Data | 1.26 | Impact on Volatility of Quantitative Easing and Tapering Announcements During First Three Months |
| Chart | Data | 1.27 | Estimated Impact of Unconventional Monetary Policies on Asian Equity Prices |
| Chart | Data | 1.28 | Exchange Rate Change Versus Current Account Deficit |
| Chart | Data | 1.29 | Selected Asia: Policy Rates |
| Chart | Data | 1.30 | Selected Countries: Public Debt and Fiscal Balance |
| Chart | Data | 1.31 | Japan: Components of Real GDP |
| Chart | Data | 1.32 | Japan: Year-over-Year Inflation |
| Chart | Data | 1.33 | Japan: Inflation Expectations |
| Chart | Data | 1.34 | Japan: Bank Lending and Reserves |
| Chart | Data | 1.35 | Japan: International Transactions in Securities |
| Chart | Data | 1.36 | Japan: Gross Public Debt |
| Chart | Data | 1.37 | China: GDP Expenditure Components |
| Chart | Data | 1.38 | China: Social Financing Flows |
| Chart | Data | 1.39 | China: Interest Rate Structure |
| Chart | Data | 1.40 | China: Illustrating Impact of Reform Implementation |
| Chart | Data | 1.41 | Cyclical Growth in ASEAN-5 Economies |
| Chart | Data | 1.42 | Output Gap Estimates, ASEAN-5 Average |
| Chart | Data | 1.43 | Variance Decomposition of Output in ASEAN-5 |
| Chart | Data | 1.44 | Historical Decomposition of Output Deviation |
| Chart | Data | 2.1 | Asia: Real GDP Growth and U.S. Real Rates |
| Chart | Data | 2.2 | Leverage Ratio Comparison |
| Chart | Data | 2.3 | Nonfinancial Corporate-Credit-to-GDP Ratio |
| Chart | Data | 2.4 | Corporate Bond and Syndicated Loan Issuance |
| Chart | Data | 2.5 | Debt-to-Equity Ratio |
| Chart | Data | 2.6 | Short-Term-to-Long-Term Debt Ratio Comparison |
| Chart | Data | 2.7 | Real Average Interest Rate Comparison |
| Chart | Data | 2.8 | Corporate Debt by Leverage Ratio |
| Chart | Data | 2.9 | Corporate Debt by Return on Assets |
| Chart | Data | 2.10 | Corporate Debt by Interest Coverage Ratio |
| Chart | Data | 2.11 | Corporate Debt by Current Ratio |
| Chart | Data | 2.12 | Stress Test: Debt of Firms with Interest Coverage Ratio Less than One |
| Chart | Data | 2.13 | Asia: Regression Results—Asian Advanced Economies Versus Emerging Asia |
| Chart | Data | 2.14 | Regression Results: Leverage Ratios Across Different Groups of Firms |
| Chart | Data | 3.1 | Business Cycle Co-movement |
| Chart | Data | 3.2 | Trade Intensity with the World and Intraregional Trade Intensity |
| Chart | Data | 3.3 | Domestic and Foreign Value-Added Embedded in Exports |
| Chart | Data | 3.4 | Foreign Value-Added Embedded in each Economy’s Exports from China and Japan; and Domestic Value-Added Embedded in each Economy’s Exports to China and Japan |
| Chart | Data | 3.5 | Median Vertical Trade with China and Japan |
| Chart | Data | 3.6 | Value-Added Exported to Partner Countries for Final Demand |
| Chart | Data | 3.7 | Degree of Intra-Industry Trade |
| Chart | Data | 3.8 | Correlation of Trade Specializations |
| Chart | Data | 3.9 | Median Bilateral Banking Integration |
| Chart | Data | 3.10 | Illustrative Impact of Explanatory Variables on Co-movement: Crisis Versus Non-crisis Times |
| Chart | Data | 3.11 | Change in Output Co-movement with China and Value-Added Exported to China for Final Demand |
| Chart | Data | 3.12 | Estimated Impact of 1 Percent Growth Surprise in China on Partner Country Growth |
| Chart | Data | 4.1 | Use of Instruments Across Regions |
| Chart | Data | 4.2 | Macroprudential Policies: Cumulative Actions by Region |
| Chart | Data | 4.3 | Capital Flow Management Measures: Cumulative Actions |
| Chart | Data | 4.4 | Event Study |
| Chart | Data | 4.5 | One-Quarter Impact of Macroprudential and Capital Flow Measures on Macro-Financial Variables |
| Chart | Data | 4.6 | Impact of Housing Measures on Bank Loan and Leverage in Asia |
| Chart | Data | 4.7 | Use of Monetary Policies Versus Macroprudential Measures |
| Annexes | |||
| Chart | Data | 2.1 | Distribution of Debt by Leverage Ratio |
| Chart | Data | 2.2 | Interest Coverage Ratio by Leverage Ratio Bucket |
