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economics@
Economic outlook for AsiaEconomic outlook for AsiaEconomic outlook for Asia
Presentation to
International Conference of Commercial Bank Economists
Presentation toPresentation to
International Conference of International Conference of Commercial Bank EconomistsCommercial Bank Economists
Madrid, Spain4th July 2007
Madrid, SpainMadrid, Spain44thth July 2007July 2007
Saul EslakeChief EconomistANZ
Saul EslakeSaul EslakeChief EconomistChief EconomistANZANZ
www.anz/com/go/economicswww.anz/com/go/economicswww.anz/com/go/economics
economics@2
Asia’s share of the world’s population has peaked but its share of the global economy is still risingAsiaAsia’’s share of the worlds share of the world’’s population has peaked s population has peaked but its share of the global economy is still risingbut its share of the global economy is still rising
Share of global population
Share of global GDP
Share of global GDP growth
10
20
30
40
50
60
70
1950 1960 1970 1980 1990 2000 2010
% of change in global GDP (at PPPs)over rolling 5-year intervals
GGDC series(1990 US$ at
GK PPPs)IMF series
US$ at PPPs)52
53
54
55
56
57
1950 1960 1970 1980 1990 2000 2010
%
Per capita GDP
15
20
25
30
35
40
1950 1960 1970 1980 1990 2000 2010
% (at PPPs)GGDC series
(1990 US$ at 'GearyKhamis' PPPs)
IMF series(US$ at PPPs)
303540455055606570
1950 1960 1970 1980 1990 2000 2010
% of world average(at PPPs)
Sources: Groningen Growth and Development Centre & The Conference Board Total Economy Database January 2007; IMF World Economic Outlook DatabaseApril 2007; Economics@ANZ.
economics@3
Asia accounts for a rising share of trade, saving, capital flows and reservesAsia accounts for a rising share of trade, saving, Asia accounts for a rising share of trade, saving, capital flows and reservescapital flows and reserves
Share of global exports
Share of global FDI flows
Share of global saving & investment
15
20
25
30
35
40
45
1980 1985 1990 1995 2000 2005 2010
% of global totals (at MERs)
Saving
Investment
5
10
15
20
25
30
1950 1960 1970 1980 1990 2000 2010
%Goods
Commercialservices
Share of FX reserves
0
5
10
15
20
25
30
1970 1980 1990 2000 2010
%
Inwards
Out-wards
0
20
40
60
80
100
1960 1970 1980 1990 2000 2010
% of world total
Sources: WTO Statistical Database; UNCTAD, World Investment Report 2006; IMF,World Economic Outlook Database April 2007 and InternationalFinancial Statistics; Economics@ANZ.
economics@4
Asia is the source of much of the world’s surplus capital – mostly now through central banksAsia is the source of much of the worldAsia is the source of much of the world’’s surplus s surplus capital capital –– mostly now through central banksmostly now through central banks
-100
0
100
200
300
400
500
600
700
80 84 88 92 96 00 04 08
Japan China
NICs ASEAN
India Other
Total
US$ bn
Note: ‘NICs’ are Korea, Taiwan, Hong Kong & Singapore. ‘ASEAN 4’ are Indonesia, Thailand, Philippines & Malaysia. Sources: IMF World EconomicOutlook database April 2007; central banks.
Asian current accountsurpluses
-100
0
100
200
300
400
500
600
80 84 88 92 96 00 04 08
Japan China
NICs ASEAN
India Total
US$ bn
Jan-Apr 2007
Annual change in Asian foreign exchange reserves
economics@5
Asian central banks and private investors have financed a large proportion of US deficitsAsian central banks and private investors have Asian central banks and private investors have financed a large proportion of US deficitsfinanced a large proportion of US deficits
Note: US Treasury International Capital (‘TIC’) System data is based on the identity of the foreign counterparty to transactions with US reporting entities and hence may not capture the full extent of transactions with particular groups such as ‘Asian purchasers’. In the TIC system ‘Asia’ includes ‘Asian oil exporters’ such as Saudi Arabia, Iran and UAE which have been excluded in this chart. Sources: US Treasury; US Bureau of Economic Analysis;Economics@ANZ.
Asian securities transactions with US residents
0
100
200
300
400
500
600
700
800
900
00 01 02 03 04 05 06 07
US$bn (12-mthmoving total)
US currentaccount deficit Asian net
transactionsin long-termsecurities withUS residents
Asian purchases of US Treasury bonds
-300
-200
-100
0
100
200
300
400
500
00 01 02 03 04 05 06 07
US$bn (12-mthmoving total) US budget
deficit
Asian (includingcentral bank) netpurchases of USTreasury notes and bonds
economics@6
Contrasting trends gross saving and investment across Japan, China, India and other economiesContrasting trends gross saving and investment Contrasting trends gross saving and investment across Japan, China, India and other economiesacross Japan, China, India and other economies
Japan India
20
22
24
26
28
30
32
1990 1993 1996 1999 2002 2005 2008
% of GDP
Grosssaving
Gross investment
202224262830323436
1990 1993 1996 1999 2002 2005 2008
% of GDP
Gross saving
Gross investment
China
202530354045505560
1990 1993 1996 1999 2002 2005 2008
% of GDP
Gross saving
Gross investment
Smaller East Asian economies*
202224262830323436
1990 1993 1996 1999 2002 2005 2008
% of GDP
Gross saving
Gross investment
* For more detail see Slide 43. Note: Gross saving calculated as gross investment plus the current account balance (as a p.c. of GDP).Sources: Economist Intelligence Unit; Economics@ANZ.
economics@7
6668707274767880
1980 1985 1990 1995 2000 2005
% of US level
Contrasting trends in productivity growth between China & India and other Asian economiesContrasting trends in productivity growth between Contrasting trends in productivity growth between China & India and other Asian economiesChina & India and other Asian economies
* Korea, Indonesia, Thailand, Malaysia and Philippines. Sources: Groningen Growth and Development Centre, Total Economy Database January 2007; Economics@ANZ.
Japan
China and India Smaller Asian economiesф
4
6
8
10
12
14
16
1980 1985 1990 1995 2000 2005
% of US levelChina
India
14
16
18
20
22
24
1980 1985 1990 1995 2000 2005
% of US level
40
50
60
70
80
90
100
1980 1985 1990 1995 2000 2005
% of US levelHong Kong
Singapore
Taiwan
‘Asian crisis’ economies*
GDP per person employed
economics@8
Asia is becoming less dependant on the US as an export marketAsia is becoming less dependant on the US as an Asia is becoming less dependant on the US as an export marketexport market
Destination of Asian merchandise exports
0
5
10
15
20
25
30
80 83 86 89 92 95 98 01 04 07
%of total (12-month moving average)
United StatesOtherAsia
EUEU
China
Japan
Source: IMF Direction of Trade Statistics; Economics@ANZ.
economics@9
JapanJapanJapan
Japan is experiencing its longest episode of economic growth since the collapse of the 1980’s ‘bubble economy’
– but it’s a weak recovery by historical standards driven largely by business investment and exports
The Japanese corporate sector and the financial system have largely recovered from the 1980s excesses and their aftermath
– however households remain cautious (despite improving labour market conditions) given weak income growth
Deflation has not yet been eradicated– hopes this time last year of a return to positive inflation rates have not
been fulfilled – obliging the BoJ to move very slowly in ‘normalizing’monetary policy settings
Diversification by households into foreign currency assets (prompted by persistently low interest rates) is the main factorbehind on-going weakness in the yen
– the ‘carry trade’ is magnifying this trend
Japanese politics are in for a period of uncertainty after this month’s Upper House election
– PM Abe will stand down and reform momentum could stall entirely if the LDP loses its Upper House majority (as seems quite likely)
Japan faces a tougher demographic challenge than any other advanced economy
economics@10
Japan’s longest period of sustained growth since the ‘bubble’ era is continuingJapanJapan’’s longest period of sustained growth since s longest period of sustained growth since the the ‘‘bubblebubble’’ era is continuingera is continuing
-10
-8
-6
-4
-2
0
2
4
6
8
10
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
From previous quarter (annualized)
From year earlier
% change
Japanese real GDP growth
Forecast
Note: Shaded periods denote recessions.Source: Economic & Social Research Institute (ESRI).
economics@11
… but growth has been very weak by comparison with earlier ‘boom’ periods…… but growth has been very weak by comparison but growth has been very weak by comparison
with earlier with earlier ‘‘boomboom’’ periodsperiods
100
110
120
130
140
150
160
170
180
0 4 8 12 16 20 24
Izanagi boom (Q4 1965 - ) Heisei boom (Q4 1986 - ) Current expansion (Q1 2002 - )
Recession trough = 100
Real GDP growth in three cycles
Sources: ESRI; Economics@ANZ.
economics@12
A striking contrast between profit and jobs growth in the current and previous expansionsA striking contrast between profit and jobs A striking contrast between profit and jobs growth in the current and previous expansionsgrowth in the current and previous expansions
Real corporate profits Employment
80
100
120
140
160
180
200
220
240
0 4 8 12 16 20 24
Recession trough = 100
Izanagi boom(Q4 66 - )
Heisei boom(Q4 86 - )
Currentexpansion(Q1 02 - )
Note: real profits are operating profits deflated by the GDP deflator. Sources: ESRI; Home Ministry; Economics@ANZ.
98
100
102
104
106
108
110
112
0 4 8 12 16 20 24
Recession trough = 100
Izanagi boom(Q4 66 - )
Heisei boom(Q4 86 - )
Currentexpansion(Q1 02 - )
economics@13
Household and consumer spending have been particularly weak compared with previous cyclesHousehold and consumer spending have been Household and consumer spending have been particularly weak compared with previous cyclesparticularly weak compared with previous cycles
100110120130140150160170
0 4 8 12 16 20 24
Recession trough = 100
Izanagi boom
Heisei boom
Current
Consumer spendingExports
100
150
200
250
300
0 4 8 12 16 20 24
Recession trough = 100
Izanagi boom
Heisei boom
Current
Business investment
100
150
200
250
300
0 4 8 12 16 20 24
Recession trough = 100
Izanagi boom
Heisei boom
Current90
100110120130140150160170
0 4 8 12 16 20 24
Recession trough = 100
Izanagi boom
Heisei boomCurrent
Public spending
Sources: ESRI; Economics@ANZ.
economics@14
Japan’s corporate sector has worked off the ‘four excesses’ created by the 1980s ‘bubble’ …JapanJapan’’s corporate sector has worked off the s corporate sector has worked off the ‘‘four four excessesexcesses’’ created by the 1980s created by the 1980s ‘‘bubblebubble’’ ……
Excess capacity
-15-10-505
10152025
90 93 96 99 02 05 08
Net balance (%) reporting 'excessive'
Large
Small
Source: Bank of Japan Tankan survey
Excess labour
-50-40-30-20-10
010203040
90 93 96 99 02 05 08
Net balance (%) reporting 'excessive'
Large
Small
Excess inventories
05
10152025303540
90 93 96 99 02 05 08
Net balance (%) reporting 'excessive'
Large
Small
Excess debt
-30
-20
-10
0
10
20
30
90 93 96 99 02 05 08
Net balance (%) reporting financialposition as 'satisfactory'
Large
Small
economics@15
… and is now in its strongest financial position since the mid-1980s…… and is now in its strongest financial position and is now in its strongest financial position since the midsince the mid--1980s1980s
Corporate profit share of GDP
1.0
1.5
2.0
2.5
3.0
80 84 88 92 96 00 04 08
% (4-qtr moving average)
Rate of return on assets
2.0
3.0
4.0
5.0
6.0
7.0
80 84 88 92 96 00 04 08
% pa (4-qtr moving average)
Rate of return on equity
1015202530354045
80 84 88 92 96 00 04 08
% pa (4-qtr moving average)
Debt-equity ratio
100
200
300
400
500
600
80 84 88 92 96 00 04 08
% (4-qtr moving average)
Sources: Bank of Japan; Economics@ANZ.
economics@16
Capital spending has been rising strongly for over three years but may have peaked this yearCapital spending has been rising strongly for over Capital spending has been rising strongly for over three years but may have peaked this yearthree years but may have peaked this year
Sources: ESRI; METI; Bank of Japan Tankan survey.
-15
-10
-5
0
5
10
15
01 02 03 04 05 06 07
Real % change from year earlier
Business investment
Machinery orders
-25-20-15-10-505
10152025
01 02 03 04 05 06 07
% change from year earlier
Seas. adj.
Trend
Successive capex estimates
Manufacturing capacity
90
92
94
96
98
100
102
01 02 03 04 05 06 07
Index: 2000 = 100
-10
-5
0
5
10
15
01 02 03 04 05 06 07
% ch from year earlier
(Fiscal yearsbeginning 1 Apr)
Actual
economics@17
The banking system has largely dealt with its bad loan problem and is now lending againThe banking system has largely dealt with its bad The banking system has largely dealt with its bad loan problem and is now lending againloan problem and is now lending again
Banks’ NPL ratio
0
2
4
6
8
10
96 97 98 99 00 01 02 03 04 05 06
% (as at 31 March)
Banks’ capital adequacy ratio
Bank lending
Sources: IMF; Financial Services Agency; Bank of Japan.
02468
101214
96 97 98 99 00 01 02 03 04 05 06
% (as at 31 March)
-8
-6
-4
-2
0
2
4
97 98 99 00 01 02 03 04 05 06 07
% change from year earlier
Tankan bank lending judgement
-30-20-10
010203040
97 98 99 00 01 02 03 04 05 06 07
Net balance (%) reporting banks' lending stance 'easier'
Largefirms
Small firms
economics@18
Employment growth is strengthening, resulting in a noticeable tightening in the labour marketEmployment growth is strengthening, resulting in Employment growth is strengthening, resulting in a noticeable tightening in the labour marketa noticeable tightening in the labour market
Source: Health, Labour & Welfare Ministry.
Participation rate
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
01 02 03 04 05 06 07
% change from year earlier(trend estimate)
Employer survey
Householdsurvey
Employment
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
01 02 03 04 05 06 07
Ratio of job offersto job seekers
‘Job offers ratio’
3.5
4.0
4.5
5.0
5.5
6.0
01 02 03 04 05 06 07
% of the labour force
Seas. adj. Trend
Lowest since Mar '98
Unemployment rate
60.0
60.5
61.0
61.5
62.0
62.5
63.0
01 02 03 04 05 06 07
% of civilian working age population
Seas. adj. Trend
economics@19
But employee earnings are still growing very slowly, so household finances remain pressuredBut employee earnings are still growing very But employee earnings are still growing very slowly, so household finances remain pressuredslowly, so household finances remain pressured
Sources: Health, Labour & Welfare Ministry; OECD; ESRI.
Employee cash earnings
-6
-4
-2
0
2
4
01 02 03 04 05 06 07
% change from year earlier
Seas. adj.
Trend
-4
-3
-2
-1
0
1
2
01 02 03 04 05 06 07
% change from year earlier
Household disposable income
2
3
4
5
6
7
8
9
01 02 03 04 05 06 07
% of disposable income
Household saving rate
30
35
40
45
50
55
01 02 03 04 05 06 07
Net balancejudging "good" (%) Tokyo
All Japan
Consumer confidence
economics@20
As a result, household spending has remained sluggishAs a result, household spending has remained As a result, household spending has remained sluggishsluggish
Sources: OECD; Land Ministry; ESRI.
Housing starts
Household consumption spending
96
97
98
99
100
101
102
01 02 03 04 05 06 07 07
Index (2000 = 100)
Trend
Actual
Retail sales volume
220230240250260270280290300
01 02 03 04 05 06 07
'000s
Trend
Actual
Passenger car sales
90
95
100
105
110
115
01 02 03 04 05 06 07 07
'000Trend
Actual
-1.0-0.50.00.51.01.52.02.53.0
01 02 03 04 05 06 07
Real % change from year earlier
economics@21
Japan’s trade surplus is rising despite slowing exports and deteriorating terms of tradeJapanJapan’’s trade surplus is rising despite slowing s trade surplus is rising despite slowing exports and deteriorating terms of tradeexports and deteriorating terms of trade
Export volumes
-15-10-505
101520
01 02 03 04 05 06 07
% change from year earlierTrend
Actual
Trade surplus
4
6
8
10
12
14
16
01 02 03 04 05 06 07
¥ trillion (annual rate)Trend
Actual
Terms of trade
707580859095
100105110
01 02 03 04 05 06 07
2000 = 100
Import volumes
-10
-5
0
5
10
15
01 02 03 04 05 06 07
% change from year earlier
Actual
Trend
Sources: Ministry of Finance; Bank of Japan.
economics@22
Rising short-term capital outflows appear to be more than offsetting the current account surplusRising shortRising short--term capital outflows appear to be term capital outflows appear to be more than offsetting the current account surplusmore than offsetting the current account surplus
Current account balance
Note: negative sign denotes capital outflows. Sources: Bank of Japan.
Direct and portfolio investment
-20-15-10-505
101520
01 02 03 04 05 06 07
¥ trn (12-mth moving total)
Net FDI
Net portfolio investment(debt and equity)
Other private capital flows
-30
-20
-10
0
10
20
30
01 02 03 04 05 06 07
¥ trn (12-mth moving total)
Change in official reserve assets
-40
-30
-20
-10
0
10
01 02 03 04 05 06 07
¥ trn (12-mth moving total)
1012141618202224
01 02 03 04 05 06 07
¥ trn (12-mth moving total)
economics@23
-200
-150
-100
-50
0
50
100
01 02 03 04 05 06 07
'000 contractsLong
Short
Capital outflows (including the so-called ‘carry trade’) keeping the yen weakCapital outflows (including the soCapital outflows (including the so--called called ‘‘carry carry tradetrade’’) keeping the yen weak) keeping the yen weak
Net open yen positions on IMM
Foreign banks’ call moneyborrowings
0
10
20
30
40
50
01 02 03 04 05 06 07
% of total outstandings
Yen vs US$100105110115120125130135140
01 02 03 04 05 06 07 08
¥ per $ (inverted)
Real trade-weighted yen
60
70
80
90
100
110
120
71 74 77 80 83 86 89 92 95 98 01 04 07
2000 = 100Record
low
Sources: Bloomberg; Bank of Japan; JP Morgan Chase.
economics@24
Contrary to appearances this time last year deflation hasn’t completely disappearedContrary to appearances this time last year Contrary to appearances this time last year deflation hasndeflation hasn’’t completely disappearedt completely disappeared
Sources: Bank of Japan; OECD; ESRI.
Corporate prices
Consumer prices
-4
-3
-2
-1
0
1
2
01 02 03 04 05 06 07
% change from year earlier
Domestic goods
Services
-2
-1
0
1
01 02 03 04 05 06 07
% change from year earlier
Excl. foodand energy
Allitems
GDP price deflator
-3.0-2.5-2.0-1.5-1.0-0.50.00.5
01 02 03 04 05 06 07
% change from year earlier
Output prices judgement
-50
-40
-30
-20
-10
0
10
01 02 03 04 05 06 07
Net balance (%) reporting increases
Large firms
Small firms
economics@25
Share and more recently land prices have been rising Share and more recently land prices have been Share and more recently land prices have been rising rising
Share prices Land prices
Sources: Thomson Financial Datastream; NationalLand Agency.
20
30
40
50
60
70
80
90
100
110
87 91 95 99 03 07
Dec 1989 = 100(monthly average)
Topix index(relative to
'bubble' peak)
20
30
40
50
60
70
80
90
100
110
87 91 95 99 03 07
Sep qtr 1990 = 100
6 major cities(relative to
'bubble' peak)
Residentialland
economics@26
Bank of Japan will move very slowly in ‘normalizing’ monetary policyBank of Japan will move very slowly in Bank of Japan will move very slowly in ‘‘normalizingnormalizing’’ monetary policymonetary policy
Banks’ current balances at BoJ
05
10152025303540
01 02 03 04 05 06 07
¥ billion
'Normal' level
Long-term interest rates
0.0
0.5
1.0
1.5
2.0
2.5
3.0
01 02 03 04 05 06 07
% per annum
10-year JGB yield
Long-termprime rate
Short-term interest rates
0.0
0.5
1.0
1.5
2.0
01 02 03 04 05 06 07 08
% per annum3-mth
interbank rate
Call money rate
90-day Tibor futures
0.00
0.50
1.00
1.50
2.00
2.50
Dec-06 Dec-07 Dec-08 Dec-09 Dec-10
% pa 30 Jun 2006
31 Dec 200619 Jun 2007
Sources: Bank of Japan; Bloomberg; Datastream.
economics@27
Japan has made substantial progress in stabilizing its fiscal position but more needs to be doneJapan has made substantial progress in stabilizing Japan has made substantial progress in stabilizing its fiscal position but more needs to be doneits fiscal position but more needs to be done
Government debtGovernment financial balance
-10
-8
-6
-4
-2
0
2
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Actual Structural
% of GDP
0
20
40
60
80
100
120
140
160
180
200
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
% of GDP
Gross
Net
Source: OECD Economic Outlook 81, May 2007.
economics@28
Demographic change will have a bigger impact on Japan than any other advanced economy Demographic change will have a bigger impact on Demographic change will have a bigger impact on Japan than any other advanced economy Japan than any other advanced economy
Population
100
105
110
115
120
125
130
1990 2000 2010 2020 2030 2040 2050
Mn
Pc of population aged 15-64
50
55
60
65
70
75
1990 2000 2010 2020 2030 2040 2050
%
Source: UNESCO, World Population Prospects: The 2006 Revision.
Median age
35
40
45
50
55
60
1990 2000 2010 2020 2030 2040 2050
Years
10
15
20
25
30
35
40
1990 2000 2010 2020 2030 2040 2050
%
Pc of population aged 65+
economics@29
ChinaChinaChinaChina’s economy is continuing to grow at a rapid (10%+) pace despite repeated efforts by the authorities to slow it down
– Premier Wen Jiabao (on 16 March this year) characterized China’s growth as ‘unstable, imbalanced, uncoordinated and unsustainable’
Recent rise in inflation is largely due to rising food (especially meat) prices and is not primarily a symptom of ‘excess demand’
– although Chinese export prices appear also to have stopped falling
Authorities have relied on ‘token’ changes to monetary policy settings and administrative measures in attempting to contain liquidity growth and its consequences
– interest rates on deposits are still negative in real terms while lending rates are well below nominal GDP growth
– increased bank reserve requirements are ineffective given that reserve holdings already exceed minimum requirements
Stockmarket is a ‘bubble’ but its bursting would have only limited consequences for the real economyCurrency policy is the main source of liquidity growth
– but authorities will resist pressure for one-off revaluation or more rapid appreciation, preferring other measures (such as allowing greater capital outflows, or removing tax-breaks for foreign investors)
Some serious thought is being given to introducing dividend requirements for SOEs – which would get to the heart of the excess saving/investment problem
economics@30
China’s GDP growth rate remains above 10% pa despite ostensible efforts to slow it downChinaChina’’s GDP growth rate remains above 10% pa s GDP growth rate remains above 10% pa despite ostensible efforts to slow it downdespite ostensible efforts to slow it down
Note: IP and retail sales figures for January and February in some years distorted by shifts in timing of New Year holidays.Source: China National Statistics Bureau
Real GDP
Industrial production
7
8
9
10
11
12
00 01 02 03 04 05 06 07 08
% ch. from year earlier
0
5
10
15
20
25
00 01 02 03 04 05 06 07
% ch. from year earlierActual
6-mth moving average
Fixed asset investment
0
10
20
30
40
50
60
00 01 02 03 04 05 06 07
Cumulative % ch.from year earlier
Retail sales
0
5
10
15
20
25
30
00 01 02 03 04 05 06 07
% ch. from year earlierActual
6-mth moving average
economics@31
Rising CPI inflation largely the result of higher meat prices – but export prices are rising tooRising CPI inflation largely the result of higher Rising CPI inflation largely the result of higher meat prices meat prices –– but export prices are rising toobut export prices are rising too
Consumer food prices Export prices
Producer pricesConsumer prices
-5
0
5
10
15
00 01 02 03 04 05 06 07
% ch. from year earlier
Food
All groups
-20
-10
0
10
20
30
40
00 01 02 03 04 05 06 07
% ch. from year earlierMeatGrains
-6-4-202468
10
00 01 02 03 04 05 06 07
% ch. from year earlier
-8-6-4-202468
05 06 07
% ch. from year earlier
China export prices
US price index ofgoods importedfrom China
Sources: China National Statistics Bureau; US Commerce Department.
economics@32
China’s external accounts continue to be a major source of liquidity generation ChinaChina’’s external accounts continue to be a major s external accounts continue to be a major source of liquidity generation source of liquidity generation
Current account surplus Foreign exchange reserves
Merchandise trade
3540455055606570
00 01 02 03 04 05 06 07
US$ bn (12-mth moving total)
Foreign direct investment
0
10
20
30
40
50
00 01 02 03 04 05 06 07
% ch. from year earlier(6-mth moving avge)
Exports
Imports
0
50
100
150
200
250
00 01 02 03 04 05 06 07
US$bn (annual moving total)
Current accountsurplus
Merchandisetrade surplus
0.00.20.40.60.81.01.21.4
00 01 02 03 04 05 06 07
US$ trn
Sources: China National Statistics Bureau; OECD; People’s Bank of China.
economics@33
Increased reserve requirements and modest rate increases haven’t stemmed credit growthIncreased reserve requirements and modest rate Increased reserve requirements and modest rate increases havenincreases haven’’t stemmed credit growtht stemmed credit growth
Source: China National Statistics Bureau; People’s Bank of China; Thomson Financial Datastream.
Money supply and bank lending
0
5
10
15
20
25
30
01 02 03 04 05 06 07
% change from year earlier
M2
Bank lending
Interest rates
5.005.255.505.756.006.256.506.757.007.25
01 02 03 04 05 06 07 08
% pa
1 yr baselending rate
Increase in FX reserves
050
100150200250300350
01 02 03 04 05 06 07
US$bn
Currentaccountsurplus
Change in FXreserves (over
12-mth interval)
Banks required reserves ratio
56789
10111213
01 02 03 04 05 06 07 08
%
economics@34
Chinese authorities are also concerned about bubble-like developments in the equity marketChinese authorities are also concerned about Chinese authorities are also concerned about bubblebubble--like developments in the equity marketlike developments in the equity market
Shanghai market capitalization
Shanghai composite index
0.0
1.0
2.0
3.0
4.0
5.0
01 02 03 04 05 06 07
Monthly average( / 1000)
Shanghai turnover
0.0
1.0
2.0
3.0
4.0
5.0
6.0
01 02 03 04 05 06 07
Yn trn (monthly)
`
Shanghai p/e ratio
0
5
10
15
20
25
01 02 03 04 05 06 07
x
0
100
200
300
400
500
01 02 03 04 05 06 07
US$bn
`
Sources: Global Source; Datastream.
economics@35
China will eventually have to let the yuan rise more strongly – for its own reasons, not the US’sChina will eventually have to let the yuan rise China will eventually have to let the yuan rise more strongly more strongly –– for its own reasons, not the USfor its own reasons, not the US’’ss
Sources: Thomson Financial Datastream; JP Morgan Chase
Yuan real effective rate
Yuan vs US$7.20
7.40
7.60
7.80
8.00
8.20
8.4000 01 02 03 04 05 06 07 08
Yuan per $(inverted)
Spotrate
12-mthNDF
90
95
100
105
110
00 01 02 03 04 05 06 07
2000 = 100
The US Treasury (correctly) concluded that China was not manipulating its currency for the purpose of ‘gaining unfair competitive advantage in international trade’
However China’s reluctance to let the yuan appreciate more rapidly is making it impossible to achieve its macroeconomic policy objectives and is fuelling asset price bubbles
For the time being China is seeking to offset pressure on the yuan by intervention and allowing more capital outflow
Eventually however (and at a time of its own choosing) China will either engineer a discrete revaluation or allow ‘market forces’ to achieve the same outcome
economics@36
IndiaIndiaIndia
India’s economy has experienced growth rates almost as rapid as China’s over the past three yearsBut unlike China, India has been showing some signs of ‘over-heating’, suggesting that India’s ‘speed limit’ is lower than China’s
– consumer price inflation exceeding 6% pa over the past year– and the emergence of the world’s ninth largest current account deficit
The policy response needed to be (and has been) stronger than inChina
– interest rates raised 1½ pc pts over the past 18 months (though lending rates remain below nominal GDP growth)
– rupee allowed to rise 13% against the dollar over past 12 months– plus some more questionable measures such as a ban on wheat exports
Despite an apparent peak in wholesale price inflation, monetary policy is unlikely to be eased any time soonIndia has what should be much more favourable demographics than China …
– India’s population will surpass China’s within 20 years and a much higher proportion of it will be of working age
… but India lags well behind China in developing its ‘human capital’ through appropriate investment in health, education and infrastructure
economics@37
Macro-economic strains associated with excess demand more obvious in India than ChinaMacroMacro--economic strains associated with excess economic strains associated with excess demand more obvious in India than Chinademand more obvious in India than China
Real GDP
Industrial production
02468
101214
00 01 02 03 04 05 06 07 08
% ch. from year earlier
02468
10121416
00 01 02 03 04 05 06 07
% ch. from year earlierActual
6-mth moving average
Current account balance
Inflation
0
2
4
6
8
10
00 01 02 03 04 05 06 07
% ch. from year earlierCPI
WPI
-80
-60
-40
-20
0
20
40
00 01 02 03 04 05 06 07
US$bn (annual moving total)
Current account
Merchandisetrade
Sources: Reserve Bank of India; Central Statistical Organization; OECD.
economics@38
Greater tolerance of currency appreciation has allowed RBI monetary policy to be more effectiveGreater tolerance of currency appreciation has Greater tolerance of currency appreciation has allowed RBI monetary policy to be more effectiveallowed RBI monetary policy to be more effective
Interest rates Foreign exchange reserves
Money and credit
05
10152025303540
00 01 02 03 04 05 06 07
% ch. from year earlie
Bank lending
M2
Rupee vs US$
0
50
100
150
200
250
00 01 02 03 04 05 06 07
US$ bn
4
6
8
10
12
14
01 02 03 04 05 06 07
% pa
RBI repo rate
Prime lending rate
38
40
42
44
46
48
5000 01 02 03 04 05 06 07 08
Rp per $(inverted)
Sources: Reserve Bank of India; Thomson Financial Datastream
economics@39
India’s demographic profile is potentially a major advantage over China …IndiaIndia’’s demographic profile is potentially a major s demographic profile is potentially a major advantage over China advantage over China ……
Population
0.6
0.8
1.0
1.2
1.4
1.6
1.8
1990 2000 2010 2020 2030 2040 2050
Bn India
China
Pc of population aged 15-64
Source: UNESCO, World Population Prospects: The 2006 Revision.
Median age
20
25
30
35
40
45
50
1990 2000 2010 2020 2030 2040 2050
YearsChina
India
Pc of population aged 65+
0
5
10
15
20
25
1990 2000 2010 2020 2030 2040 2050
%
China
India
55
60
65
70
75
1990 2000 2010 2020 2030 2040 2050
%
China
India
economics@40
… but India lags a long way behind China in developing its ‘human capital’…… but India lags a long way behind China in but India lags a long way behind China in developing its developing its ‘‘human capitalhuman capital’’
China India
Probability at birth of surviving to 65 (%) -
Cell phones per 1000 population (2003) 258 44
No of procedures to start a business (2006) 13 11
Infant mortality (% of births, 2004) 26 62
Males born 2000-05
Females born 2000-05
1 yr olds immunized against TB (%, 2004)
Population with access to -
Improved sanitation
Improved drinking water
Adult literacy (%, 2004)
Internet users per 1000 population (2003)
Rigidity of employment index (2006)
No of days to enforce a debt (2006)
74.2 59.2
81.3 67.4
94 73
44 33
73 32
24 41
77 86
90.9 61.0
292 1,420
Sources: UNDP Human Development Report 2006; World Bank Doing Business 2006 database
economics@41
Smaller East Asian economiesSmaller East Asian economiesSmaller East Asian economiesThe economies affected by the financial crisis of a decade ago have never completely recovered from it
– on average, growth rates over the past five years have been three-quarters of their average over the five years prior to the crisis
Governments of countries affected by the financial crisis have sought to ‘buy insurance’ against a recurrence by
– suppressing investment (by 5-6 pc pts of GDP), running large current account surpluses and accumulating large stockpiles of FX reserves
The rising inflation experienced by most smaller Asian economiesduring 2005 and 2006 has since been reversed through a combination of tighter monetary policy and currency appreciation
– interest rates have begun falling and in most cases will fall further– some countries (particularly Korea and Thailand) are again worrying
about exchange rate strength (and in Thailand damaging market confidence by their attempts to prevent it), while Taiwan by contrast is worried about capital outflows and persistent currency weakness
Political uncertainties weigh on Thailand, Korea, Taiwan and (tosome extent) IndonesiaImprovements in Indonesia and the Philippines are under-appreciated by the global investment community
– in particular Indonesia merits inclusion in the so-called ‘BRICs’
By contrast Vietnam’s strong economic performance is (rightly) attracting significant investor interest
economics@42
Among the smaller East Asian economies only the Philippines has regained its pre-crisis growth rateAmong the smaller East Asian economies only the Among the smaller East Asian economies only the Philippines has regained its prePhilippines has regained its pre--crisis growth ratecrisis growth rate
Note: horizontal lines show average annual growth rates for Q2 1990 – Q2 1997and Q1 2000 – Q1 2007. Sources: National statistical agencies and central banks; Datastream; Economics@ANZ.
Korea
-10
-5
0
5
10
15
90 93 96 99 02 05 08
% ch from yr earlier
Taiwan
-6-4-202468
10
90 93 96 99 02 05 08
% ch from yr earlier
Hong Kong
-10
-5
0
5
10
15
90 93 96 99 02 05 08
% ch from yr earlier
Singapore
-10
-5
0
5
10
15
90 93 96 99 02 05 08
% ch from yr earlier
Indonesia
-20-15-10-505
1015
90 93 96 99 02 05 08
% ch from yr earlier
Thailand
-15
-10
-5
0
5
10
15
90 93 96 99 02 05 08
% ch from yr earlier
Malaysia
-15
-10
-5
0
5
10
15
90 93 96 99 02 05 08
% ch from yr earlier
Philippines
-4
-2
0
2
4
6
8
90 93 96 99 02 05 08
% ch from yr earlier
Real GDP growth: smaller East Asian economies
Investment has fallen (in some cases massively) as a share of GDP since the crisis …Investment has fallen (in some cases massively) Investment has fallen (in some cases massively) as a share of GDP since the crisis as a share of GDP since the crisis ……
Korea
25
30
35
40
45
90 93 96 99 02 05 08
% of GDP
Investment
Saving
Taiwan Hong Kong Singapore
Indonesia Thailand Malaysia Philippines
Gross investment and saving as percentages of GDP
15
20
25
30
35
90 93 96 99 02 05 08
% of GDP
Investment
Saving
20
25
30
35
90 93 96 99 02 05 08
% of GDP
Saving
Investment
Saving
20
30
40
50
60
70
90 93 96 99 02 05 08
% of GDP
Investment
Saving
15
20
25
30
90 93 96 99 02 05 08
% of GDP
Investment
Saving
20
25
30
35
40
45
90 93 96 99 02 05 08
% of GDP
Investment
Saving
20
25
30
35
40
45
90 93 96 99 02 05 08
% of GDP
Invest-ment
Saving
10
15
20
25
30
35
90 93 96 99 02 05 08
% of GDP
Investment
Saving
Investment
Saving
economics@43Sources: Economist Intelligence Unit; Economics@ANZ.
… which is the main ‘structural’ reason for the swing in these countries’ current accounts…… which is the main which is the main ‘‘structuralstructural’’ reason for the reason for the swing in these countriesswing in these countries’’ current accountscurrent accounts
Korea
-5
0
5
10
15
90 93 96 99 02 05 08
% of GDP
Taiwan Hong Kong Singapore
Current account balances as percentages of GDP
0
2
4
6
8
10
12
90 93 96 99 02 05 08
% of GDP
-10
-5
0
5
10
15
90 93 96 99 02 05 08
% of GDP
0
5
10
15
20
25
30
90 93 96 99 02 05 08
% of GDP
Indonesia Thailand Malaysia Philippines
-4
-2
0
2
4
6
90 93 96 99 02 05 08
% of GDP
-10
-5
0
5
10
15
90 93 96 99 02 05 08
% of GDP
-15-10-505
101520
90 93 96 99 02 05 08
% of GDP
-8
-6
-4
-2
0
2
4
90 93 96 99 02 05 08
% of GDP
economics@44 Source: IMF World Economic Outlook database (April 2007).
Large external surpluses have allowed these countries to accumulate substantial FX reservesLarge external surpluses have allowed these Large external surpluses have allowed these countries to accumulate substantial FX reservescountries to accumulate substantial FX reserves
Korea
0
50
100
150
200
250
300
90 93 96 99 02 05 08
US$bn
Taiwan Hong Kong Singapore
Indonesia Thailand Malaysia Philippines
Foreign exchange reserves
0
50
100
150
200
250
300
90 93 96 99 02 05 08
US$bn
0
25
50
75
100
125
150
90 93 96 99 02 05 08
US$bn
0
25
50
75
100
125
150
90 93 96 99 02 05 08
US$bn
0
10
20
30
40
50
90 93 96 99 02 05 08
US$bn
01020304050607080
90 93 96 99 02 05 08
US$bn
0
20
40
60
80
100
90 93 96 99 02 05 08
US$bn
0
5
90 93 96 99 02 05 08
US$bn
10
15
20
25
economics@45 Source: Central banks.
All the smaller East Asian economies now have very comfortable FX reserve positionsAll the smaller East Asian economies now have All the smaller East Asian economies now have very comfortable FX reserve positionsvery comfortable FX reserve positions
Korea
0
25
50
75
100
125
150
90 93 96 99 02 05 08
%
Taiwan Hong Kong Singapore
Indonesia Thailand Malaysia Philippines
Ratio of FX reserves to gross foreign debt
200
250
300
350
400
450
500
90 93 96 99 02 05 08
%
100150200250300350400450500
90 93 96 99 02 05 08
%
300
400
500
600
700
800
900
90 93 96 99 02 05 08
%
10
15
20
25
30
35
40
90 93 96 99 02 05 08
%
25
50
75
100
125
90 93 96 99 02 05 08
%
255075
100125150175200
90 93 96 99 02 05 08
%
0
10
20
30
40
50
90 93 96 99 02 05 08
%
economics@46 Source: Economist Intelligence Unit.
economics@47
Most central banks have allowed their currencies to rise (Korea & Thailand have tried to cap theirs)Most central banks have allowed their currencies Most central banks have allowed their currencies to rise (Korea & Thailand have tried to cap theirs)to rise (Korea & Thailand have tried to cap theirs)
Source: Thomson Financial Datastream; Economics@ANZ.
Korea0.8
0.9
1.0
1.1
1.2
1.3
1.40102030405060708
'000 Won per $
Taiwan Hong Kong Singapore
Indonesia Thailand Malaysia Philippines
Smaller East Asian currencies vs US dollar
30
31
32
33
34
35
3601 020304 05060708
NT$ per $ 7.5
7.6
7.7
7.8
7.9
8.00102030405060708
HK$ per $ 1.4
1.5
1.6
1.7
1.8
1.90102030405060708
S$ per $
7
8
9
10
11
1201 020304 05060708
'000 Rupiah per $ 30
35
40
45
5001 020304 05060708
Baht per $ 3.0
3.2
3.4
3.6
3.8
4.00102030405060708
Ringgit per $ 40
45
50
55
6001 020304 05060708
Pesos per $
economics@48
0
1
2
3
4
5
6
01 02 03 04 05 06 07
% ch from year earlier
'Headline'
Excl. agri.products & oil
Currency appreciation and tighter monetary policy have set inflation on a downward pathCurrency appreciation and tighter monetary policy Currency appreciation and tighter monetary policy have set inflation on a downward pathhave set inflation on a downward path
Note: Inflation rates in Indonesia, Thailand & Malaysia were elevated during 2006 by the abolition or reduction in fuel price subsidies.Sources: National statistical agencies and central banks.
Korea Taiwan Hong Kong Singapore
Indonesia Thailand Malaysia Philippines
Consumer prices
-3-2-101234
01 02 03 04 05 06 07
% ch from year earlier
'Head-line'
Excl. food& energy
-5-4-3-2-10123
01 02 03 04 05 06 07
% ch from year earlier
Compositeindex
-2
-1
0
1
2
3
01 02 03 04 05 06 07
% ch from year earlier
-5
0
5
10
15
20
01 02 03 04 05 06 07
% ch from year earlier'Headline'
Excl. food
-2
0
2
4
6
8
01 02 03 04 05 06 07
% ch from year earlier
'Headline'
Excl. food0
1
2
3
4
5
01 02 03 04 05 06 07
% ch from year earlier
0
2
4
6
8
10
12
01 02 03 04 05 06 07
% ch from year earlier
'Headline'
Excl. food
economics@49
0
5
10
15
20
01 020304 05060708
% pa
1 monthSBI rate
0
1
2
3
4
5
6
0102 03 0405 06 07 08
% pa
Overnightcall rate
Lower inflation and in some cases exchange rate objectives point to declining interest ratesLower inflation and in some cases exchange rate Lower inflation and in some cases exchange rate objectives point to declining interest ratesobjectives point to declining interest rates
Source: Thomson Financial Datastream; Economics@ANZ.
Korea Taiwan Hong Kong Singapore
Indonesia Thailand Malaysia Philippines
Monetary policy indicator interest rates
0
1
2
3
4
5
0102 03 0405 06 07 08
% pa
Discountrate
012345678
0102 03 0405 06 07 08
% pa
Baserate
0
1
2
3
4
0102 03 0405 06 07 08
% pa
3-mthrate
0
1
2
3
4
5
6
0102 03 0405 06 07 08
% pa
14-dayrepo rate
0
1
2
3
4
0102 03 0405 06 07 08
% pa
BNM overnightpolicy rate
02468
10121416
01 020304 05060708
% pa
BSP overnightrate
economics@50
Indonesia is entitled to be considered among the so-called ‘BRICs’Indonesia is entitled to be considered among the Indonesia is entitled to be considered among the soso--called called ‘‘BRICsBRICs’’
Source: IMF World Economic Outlook April 2007 database; The Heritage Foundation Index of Economic Freedom.
Population, 2006
0.0
0.2
0.4
0.60.8
1.0
1.2
1.4
China India Russia Brazil Indonesia
Bns
Per capita GDP, 2006
0
2
4
68
10
12
14
China India Russia Brazil Indonesia
US$'000
Real GDP growth, 2001-06
0
2
4
6
8
10
China India Russia Brazil Indonesia
% per annum
‘Economic freedom’ 2006
50
52
54
56
58
60
62
China India Russia Brazil Indonesia
Index (%) Worldaverage
economics@51
The Philippines is significantly improving its fiscal and external financial positionThe Philippines is significantly improving its The Philippines is significantly improving its fiscal and external financial positionfiscal and external financial position
Government revenue & outlays
Budget balance Gross foreign debt
Current account balance
141516171819202122
96 97 98 99 00 01 02 03 04 05 06
% of GDPExpenditures
Revenues
-6-5-4-3-2-101
96 97 98 99 00 01 02 03 04 05 06
% of GDP
-6-4-202468
1012
96 97 98 99 00 01 02 03 04 05 06 07
US$ bn (12-mth moving total)
150175200225250275300325
96 97 98 99 00 01 02 03 04 05 06 07
% of GDP
Sources: Philippines National Statistics Office; Banco Sentral ng Pilipinas; Economics@ANZ.
economics@52
Indonesia and the Philippines have a lot to do to become more attractive to businessIndonesia and the Philippines have a lot to do to Indonesia and the Philippines have a lot to do to become more attractive to businessbecome more attractive to business
* Index runs 0-100 with 100 being most rigid.Source: World Bank, Doing Business 2006 database.
Procedures to start a business
0
24
6
8
1012
14
CH IN HK TW TH MY SP ID PH VN
Number
Days to start a business
0
20
40
60
80
100
CH IN HK TW TH MY SP ID PH VN
Days
Rigidity of employment index*
0
10
20
30
40
50
60
CH IN HK TW TH MY SP ID PH VN
Index
Days to enforce a contract
0
250
500
750
1000
1250
1500
CH IN HK TW TH MY SP ID PH VN
Days
economics@53
Vietnam is Asia’s third most rapidly-growing economy, after China and IndiaVietnam is AsiaVietnam is Asia’’s third most rapidlys third most rapidly--growing growing economy, after China and Indiaeconomy, after China and India
Real GDP
Shares of GDP
0
2
4
6
8
10
90 92 94 96 98 00 02 04 06 08
% ch. from year earlier
GDP by form of ownership
Saving and investment
5
10
15
20
25
30
35
90 92 94 96 98 00 02 04 06 08
% of GDP
Saving
Investment
15
20
25
30
35
40
45
90 92 94 96 98 00 02 04 06 08
% of GDP
Agriculture
Industry
0
10
20
30
40
50
60
95 96 97 98 99 00 01 02 03 04 05 06
% of GDP
ForeignState-owned
Non State-owned
Sources: IMF; Economist Intelligence Unit; General Statistical Office of Vietnam; Economics@ANZ.
economics@54
Vietnam’s external and domestic fundamentals have improved significantly over the past decadeVietnamVietnam’’s external and domestic fundamentals s external and domestic fundamentals have improved significantly over the past decadehave improved significantly over the past decade
Sources: Economist Intelligence Unit; General Statistical Office of Vietnam; Economics@ANZ.
Current account balance
Net foreign debt
-15
-10
-5
0
5
90 92 94 96 98 00 02 04 06 08
% of GDP
050
100150200250300350400
90 92 94 96 98 00 02 04 06 08
% of GDP
Inflation
-10
0
10
20
30
40
90 92 94 96 98 00 02 04 06 08
% of GDP
Exports
20
30
40
50
60
70
80
90 92 94 96 98 00 02 04 06 08
% of GDP
economics@55
10
20
30
40
50
60
90 00 10 20 30 40 500
10
20
30Yrs
Medianage (lhs)
% aged65+ (rhs)
%
10
20
30
40
50
60
90 00 10 20 30 40 500
10
20
30
40Yrs
Medianage (lhs)
% aged65+ (rhs)
%
The richer Asian economies have much more challenging demographic profilesThe richer Asian economies have much more The richer Asian economies have much more challenging demographic profileschallenging demographic profiles
Korea Vietnam
Indonesia Thailand Malaysia Philippines
Median age and % of population in retirement age groupsHong Kong Singapore
10
20
30
40
50
60
90 00 10 20 30 40 500
10
20
30
40YrsMedian
age (lhs)
% aged65+ (rhs)
%
10
20
30
40
50
60
90 00 10 20 30 40 500
10
20
30
40YrsMedian
age (lhs)
% aged65+ (rhs)
%
10
20
30
40
50
60
90 00 10 20 30 40 500
10
20
30
40Yrs
Medianage (lhs)
% aged65+ (rhs)
%
10
20
30
40
50
60
90 00 10 20 30 40 500
10
20
30
40Yrs
Medianage (lhs)
% aged65+ (rhs)
%
10
20
30
40
50
60
90 00 10 20 30 40 500
10
20
30Yrs
Medianage (lhs)
% aged65+ (rhs)
%
10
20
30
40
50
60
90 00 10 20 30 40 500
10
20Yrs
Medianage (lhs)
% aged65+ (rhs)
%
Source: UNESCO, World Population Prospects: The 2006 Revision.
economics@56
Key risks for AsiaKey risks for AsiaKey risks for AsiaRising protectionism in the US (and possibly Europe also)
– a majority of the current Congress appears to favour imposing tariffs on imports from China – and whoever wants to be President after January 2009 may feel obliged to pander to this mood
– unilateral tariffs on imports from China would redistribute the US deficit from China to other countries (including other Asian countries) but would also lead to higher US inflation and interest rates and lower US and global growth
– and would induce retaliation in a form which could lead to destabilizing capital flows and currency swings
‘Excess liquidity’ in Asian financial systems and asset price bubbles
– prompted by excessive reserve accumulation and resistance to exchange rate appreciation and/or excessively loose monetary policy
– potentially leading to macroeconomic instability and renewed banking system problems
Political uncertainty and / or unfavourable political trends– particularly in Japan, Thailand (where an election is supposed to be
held by November) and Taiwan (Presidential election March 2008)– Likely positive outcome from December’s Korean presidential election
Extended or abrupt slowdown in the US– although Asia is less directly dependent on the US as a market than
hitherto there are still strong indirect linkages via China
economics@57
Summary of the Asian economic outlook (1)Summary of the Asian economic outlook (1)Summary of the Asian economic outlook (1)
Real GDP growth (% pa) 2005 2006 2007 2008
Japan 1.9 2.2 2½ 2
East Asia ex Japan & China 5.1 5.5 5¼ 5¼
10.7
5.0
4.6
6.8
5.6
5.0
5.9
7.9
5.4
Vietnam 8.4 8.2 8 8
9.4
China 10.2 10¼ 9½
Korea 4.0 4½ 4¼
Taiwan 4.0 4 3½
Hong Kong 7.3 6½ 6¼
Indonesia 5.6 6 6½
Thailand 4.5 4¼ 5½
Malaysia 5.2 5½ 5¾
Singapore 6.4 6¼ 5½
Philippines 5.0 6½ 4½
India (a) 8.5 8¾ 8
(a) Fiscal years beginning 1 April
economics@58
Summary of the Asian economic outlook (2)Summary of the Asian economic outlook (2)Summary of the Asian economic outlook (2)
Inflation (% pa) 2005 2006 2007 2008
Japan -0.2 0.0 ½ 1
1.5
2.7
0.6
2.0
13.3
4.7
3.6
1.0
6.3
Vietnam 8.2 7.5 7 6¾
6.0
China 1.8 3¼ 3
Korea 2.8 3¼ 3½
Taiwan 2.3 1½ 2
Hong Kong 0.9 1¾ 2¼
Indonesia 10.5 6 5
Thailand 4.5 2 2¼
Malaysia 2.9 2 2¼
Singapore 0.5 1 1¾
Philippines 7.8 4 5
India (a) 4.2 6 5½
(a) Fiscal year beginning 1 April
economics@59
Summary of the Asian economic outlook (3)Summary of the Asian economic outlook (3)Summary of the Asian economic outlook (3)
Current account (% of GDP) 2005 2006 2007 2008
Japan 3.6 3.7 3½ 2½
9.5
1.7
5.8
9
2.6
1.6
15.8
27.5
5.0
Vietnam 0.9 1.5 1¾ 2
-1.7
China 7.2 10 9½
Korea 2.4 1¼ 1
Taiwan 4.7 5½ 6
Hong Kong 11.4 8 8½
Indonesia 0.1 1½ 1
Thailand -4.5 2½ 1½
Malaysia 15.3 15¼ 15
Singapore 24.5 25 24
Philippines 2.4 4 5
India (a) -0.9 -2¼ -2¾
(a) Fiscal year beginning 1 April
economics@60
Asian interest rate outlookAsian interest rate outlookAsian interest rate outlook
Rate (% pa) Dec 2006*
Jun 2007*
Dec 2007
Jun 2008
Japan call rate 0.25 0.50 1.00 1.25
7.02
4.25
3.25
5.75
8.00
3.50
3.00
2.60
7.00
7.75
1.50
6.57
4.50
3.13
6.50
8.75
4.00
3.50
2.58
7.50
7.75
Dec 2008
China 1 yr base rate 6.12 6.75 6.75
Korea call rate 4.50 4.50 4.00
Taiwan discount rate 2.75 3.25 3.00
Hong Kong discount rate 6.75 5.75 5.75
Indonesia BI rate 9.75 8.00 8.00
Thailand 14-d repo rate 5.00 3.50 3.50
Malaysia overnight rate 3.50 3.25 3.00
Singapore 3-mth rate 3.44 2.60 2.60
Philippines reverse repo 7.50 7.25 7.25
India reverse repo 7.25 7.75 7.75
* Actual
economics@61
Asian currency outlookAsian currency outlookAsian currency outlook
Currency values per US$
Dec 2006*
Jun 2007*
Dec 2007
Jun 2008
Yen 116 122 125 126
7.40
910
31.5
7.80
8 300
37.0
3.35
1.49
48
16 200
39.8
123
7.62
925
33.0
7.82
8 900
34.5
3.43
1.53
46
Dong 16 050 16 100 16 100 16 250
40.0
Dec 2008
China 7.81 7.45 7.30
Won 930 910 925
NT$ 32.6 32.0 31.0
HK$ 7.78 7.80 7.80
Rupiah 8 995 8 500 8 100
Baht 35.5 36.0 38.0
Ringgit 3.53 3.37 3.33
S$ 1.54 1.50 1.48
Peso 49 45 52
Rupee 44.3 39.5 40.0
* Actual
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