Yasuyuki Sawada Chief Economist, Asian Development Bank Key - - PowerPoint PPT Presentation

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Yasuyuki Sawada Chief Economist, Asian Development Bank Key - - PowerPoint PPT Presentation

Jun 18, 2023 301 likes •537 views

Yasuyuki Sawada Chief Economist, Asian Development Bank Key Messages Developing Asias growth will slow to 2.2% in 2020 due to the COVID- 19 outbreak, but will rebound to 6.2% in 2021 The growth decline is broad-based, affecting the PRC

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Yasuyuki Sawada Chief Economist, Asian Development Bank

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Key Messages

  • Developing Asia’s growth will slow to 2.2% in 2020 due to the COVID-

19 outbreak, but will rebound to 6.2% in 2021

  • The growth decline is broad-based, affecting the PRC and India and

the rest of developing Asia’s economies

  • Inflation will tick up to 3.2% in 2020 due to higher food prices before

easing to 2.3% in 2021

  • Risks are extremely large due to uncertain evolution and effects of the

COVID-19 pandemic

  • Innovation can unlock faster growth in the region—but it

requires sound education systems, innovative entrepreneurship, conducive institutions, deeper capital markets, and dynamic cities

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Growth th will s slow sharp rply this year, due to the global p pandemic

GDP growth outlook in developing Asia

%

6.1 6.1 6.2 5.9 5.2 2.2 6.2 6.7 6.6 6.6 6.4 5.7 2.4 6.7 5.4 5.5 6.0 6.0 2.0 3.5 5.0 6.5 8.0 2015 2016 2017 2018 2019 2020 2021

Developing Asia Developing Asia excluding NIEs

ADO 2020 ADO 2019 Update ADO 2020 ADO 2019 Update Forecast

Growth in developing Asia will take a beating from the COVID-19 global pandemic…

Baseline assumptions on the international economy

2019 2020 2021

ADO 2019 Update ADO 2020 ADO 2019 Update ADO 2020

GDP growth (%) Major advanced economies 1.7 1.7 1.4

  • 0.3 

1.8 United States 2.3 2.3 1.9 0.4  2.1 Euro area 1.0 1.2  1.0

  • 1.0 

1.6 Japan 1.2 0.7  0.5

  • 1.5 

0.9 Brent crude spot prices (average, $ per barrel) 65.00 64.03  63.00 35.00  55.00

… as major advanced economies are set to contract after already slowing in 2019.

 = upgraded forecast,  = downgraded forecast, no sign = unchanged.

Source: Asian Development Outlook database. Sources: Bloomberg, Haver Analytics, ADB estimates.

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An inci cipient r t recovery from a disappointi ting 2019 w was halted, when the outbreak began i in the PR PRC

Global activity indicators

Feb 2020, -2.8 Dec 2020, 0.5

Jan 2020, -0.3

  • 24
  • 12

12

  • 4
  • 2

2

Jan 2019 Apr Jul Oct Jan 2020

Points difference from 50 % change year on year % change year on year

Global Manufacturing PMI Worldwide semiconductor billings World trade volume

Global activity had shown signs of revival at the end of 2019, but this recovery was snuffed…

Manufacturing PMI and industrial production, Developing Asia

… as a coronavirus outbreak began in the PRC in January and put a brake on activity there.

Sources: CEIC Data Company; CPB Netherlands Bureau for Economic Policy Analysis. https://www.cpb.nl/en/worldtrademonitor; World Semiconductor Trade

  • Statistics. http:// wsts.tsia.org.tw/, ADB estimates.

Sources: CEIC Data Company, ADB estimates. 40.3 51.0 Jan-Feb 2020

  • 13.5

2.3

  • 20
  • 10

10

35 40 45 50 55 Jan 2019 Mar May Jul Sep Nov Jan 2020 Feb Markit manufacturing PMI: PRC (left axis) Markit manufacturing PMI: developing Asia ex PRC (left axis) Industrial production: PRC (right axis) Industrial production: developing Asia ex PRC (right axis) Index % change year on year

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Growth th will s slow this year r in the PR PRC and India…

7.0 6.1 5.0 4.0 6.2 6.9 6.7 6.1 2.3 7.3 2017 2018 2019 2020 2021

India PRC Growth in India and PRC

%

8.0

  • 20.5

6.9

  • 13.5

2017 2018 2019 2020

Retail sales

Industrial production

PRC retail sales and industrial production

% change year on year

India nonfood credit growth

% change year on year

Production fell in the PRC from COVID-19. Efforts to revive credit in India will be offset by a weak global economy. The region’s two largest economies will continue to slow before recovering in 2021

(Jan-Feb 2020) (Jan-Feb 2020) Nov 2018, 15.3 Jan 2020, 8.3 Jan 2017 Jul Jan 2018 Jul Jan 2019 Jul Jan 2020 Source: Asian Development Outlook database.

Sources: CEIC Data Company, National Bureau of Statistics (for PRC retail sales and IP).

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 = upgraded forecast,  = downgraded forecast, no sign = unchanged.

2019 2020 2021 2019 2020 2021

Actual Projections Actual Projections

East Asia 5.4 2.0

6.5  South Asia 5.1 4.1

6.0

Hong Kong, China

  • 1.2
  • 3.3

3.5

Bangladesh 8.2 7.8

8.0

PRC 6.1 2.3

7.3

India 5.0 4.0

6.2

Republic of Korea 2.0 1.3

2.3

Pakistan 3.3 2.6

3.2

Taipei,China 2.7 1.8

2.5

Central Asia 4.9 2.8

4.2

Southeast Asia 4.4 1.0

4.7 

Azerbaijan 2.2 0.5

1.5

Indonesia 5.0 2.5

5.0

Kazakhstan 4.5 1.8

3.6

Malaysia 4.3 0.5

5.5

Philippines 5.9 2.0

6.5

 The Pacific

3.8

  • 0.3

2.7

Singapore 0.7 0.2

2.0

Fiji 0.7

  • 4.9

3.0

Thailand 2.4

  • 4.8

2.5

Papua New Guinea 4.8 0.8

2.8

Viet Nam 7.0 4.8

6.8

Developing Asia 5.2 2.2

6.2  excluding the NIEs 5.7 2.4

6.7

 Source: Asian Development Outlook database.

… and i in the rest o

  • f developing As

Asia, before recovering in n 2021. 2021.

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EA, 18.9 SEA, 3.5 SA, 9.8 CA, 8.9 DA, 15.9

Jan 2018 Jul 2018 Jan 2019 Jul 2019 Jan 2020

Inflation will t tick up this year o r on i increased food pr price ces but w s but will eas ase i in 2021. n 2021.

Regional inflation will increase mainly on food price increases, but will ease in 2021… …as elevated pork prices in the PRC and onion prices in India are expected to stabilize. Subregional contributions to inflation in developing Asia

Percentage points Developing Asia (DA) East Asia (EA) Southeast Asia (SEA) South Asia (SA) Central Asia (CA)

Monthly food inflation in developing Asia

% change year on year

2.5 2.9 3.2 2.3 2018 2019 2020 2021 Forecast

East Asia Southeast Asia South Asia

Central Asia

Inflation (%), developing Asia

Source: Asian Development Outlook database. Source: CEIC Data Company, ADB estimates.

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Current account forecast in developing Asia

% of GDP f = forecast.

0.7 1.5 2.0 2.5

  • 1.5
  • 2.2

1.6 2.2 1.9

  • 0.7
  • 3.8

1.4 1.9 1.9

  • 1.3
  • 2.4

16.0 10.1 13.9

  • 30
  • 20
  • 10

10 20

  • 6
  • 4
  • 2

2 4 Developing Asia East Asia Southeast Asia South Asia Central Asia The Pacific

2018 2019 2020f 2021f

The region’s c current account s surp rplus will widen in n 2020 be 2020 before nar narrowing in n 2021 2021

Trade growth will weaken further this year as demand and supply are disrupted by the COVID-19 outbreak. The regional current account surplus will expand to 1.6% in 2020, before falling back to 1.4% in 2021.

Source: Asian Development Outlook database.

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Equity index, selected economies

The global pandemic p presents an extreme risk to regional a and g globa bal outlook

The global pandemic has resulted in falling stock prices, depreciating currencies, and rising spreads

60 80 100 120 140 J 2 a n 19 Apr Jul Oct J 2 a n 20 Mar India People's Republic of China NIEs ASEAN-5 US COVID-19

  • utbreak

1 Jan 2019 = 100 Sources: CEIC Data Company, Bloomberg.

  • The forecast assumes containment this year,

and a return to normal activity next year. But:

  • The outbreak can spread to more countries
  • It may take longer to contain
  • Economic effects may be larger
  • Financial turmoil and crises are possible
  • It could result in fundamental, long-run

changes to the global economy

  • Quick and decisive policy actions are needed
  • Forecasts quickly become outdated in this fast-

changing environment; we will update as needed

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ADO Part I Special Topic: The impact of COVID-19 on developing Asia—an update

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100,000 200,000 300,000 400,000 500,000 600,000 20 Jan 31 Jan 15 Feb 29 Feb 15 Mar 28 Mar

Global COVID-19 cases

PRC Europe USA Rest of the world Data for March 6 ADB Brief

Note: The discrete jump in the series in mid-February is due to the change in the diagnostic criterion applied to identify infections. Sources: CEIC and the World Health Organization (accessed 25 March 2020).

Since the AD ADB’s initial estimate o

  • f the impact
  • f the COVID

ID-19 19 o

  • utb

utbreak k on n Mar arch ch 6: 6:

Travel bans now affect 550 million

international trips—40% of global total

People’s Republic of China (PRC) data: Jan-Feb y/y % change Industrial production

  • 13.5%

Services production

  • 13.0%

Retail sales

  • 20.5%

Investment

  • 24.5%

It has become a global pandemic… …the use of containment policies has increased dramatically… …and PRC data has come out worse than expected.

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As a result, t, th the esti timated g global and r regional economic impacts are now s substanti tially l larger

Estimated Global and Regional Impact of the COVID-19 Outbreak

  • Containment and travel bans last either 3 months (shorter) or 6 months (longer); demand shocks are

either -2pp on C and I growth (smaller), or -5pp on C growth and -6.25pp on I growth (larger)

  • The estimated impact on individual developing Asian economies—and on sectors within these

economies—is also available: https://www.adb.org/covid19

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ADO Theme Chapter: What Drives Innovation in Asia?

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0.0 1.0 2.0 3.0 4.0 1996 1999 2002 2005 2008 2011 2014 2017

R&D Expenditure (% GDP)

NIEs OECD PRC Rest of Developing Asia

So Some Asi sian ec econ

  • nomie

ies a s are e rapid idly ly clos

  • sin

ing t the e innovation g gap … but many others lag behind

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Learning poverty and GDP per capita in Asian economies

15

Get t the f fund ndamentals right f first—too ma

  • many of Asia’s

children aren’t g getting proper r basic education

1 out of 3 ten-year-olds in developing

Asia cannot read adequately

PRC India Indonesia Pakistan Bangladesh Japan Viet Nam Thailand Republic of Korea Afghanistan Malaysia Sri Lanka Kazakhstan Cambodia Azerbaijan Hong Kong, China Kygryz Republic Singapore Georgia Armenia 10 20 30 40 50 60 70 80 90 100 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 % learning poverty GDP/capita, $

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A few baby businesses provide a disproportionate share of employment

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Note: Data cover businesses less than 42 months old, during 2006–2016, for Bangladesh; Georgia; Hong Kong, China; India; Indonesia; Kazakhstan; Malaysia; Pakistan; the PRC; the Philippines; the ROK; Singapore; Taipei,China; Thailand; Tonga; Vanuatu; and Viet Nam.

To support t innovati tion, , focus on th the “gazelles”—the hey generate the most j jobs and innovation

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

% of firms % of employment 0.4

Fewer than 1 in 6 entrepreneurs are involved in innovation activity

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Registration of intellectual property rights in the Republic of Korea, 1970-2010

500,000 1,000,000 1,500,000 2,000,000 1971–1986 1987–1998 1999-2009 Patents and Designs Trademarks and Utility Models

37%

Differ eren ent IPRs Rs matter mor

  • re

e for

  • r innovation
  • n at

differ eren ent stages es of develop

  • pmen

ent

44% 56% 56% 44% 63%

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Financial markets have a bigger i r impact

  • n innovation than b

banks

*** ***

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Dynamic cit itie ies wit ith hig igh-quality universities are hotbeds for r innovation

Firm innovation near a top university

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Key Messages

  • Developing Asia’s growth will slow to 2.2% in 2020 due to the COVID-

19 outbreak, but will rebound to 6.2% in 2021

  • The growth decline is broad-based, affecting the PRC and India and

the rest of developing Asia’s economies

  • Inflation will tick up to 3.2% in 2020 due to rising food prices before

easing to 2.3% in 2021

  • Risks are extremely large due to uncertain evolution and effects of the

COVID-19 pandemic

  • Innovation can unlock faster growth in the region—but it requires

sound education systems, innovative entrepreneurship, conducive institutions, deeper capital markets, and dynamic cities

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Thank you

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Detailed assumptions f for C r COVID ID-19 impact analysis

  • Travel bans and

precautionary behavior will reduce tourism

  • Declines in consumption

and investment in

  • utbreak-affected

economies

  • Spillovers through trade

and production linkages captured via ADB Multi- Region Input-Output Tables (ADB MRIOT)

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