impact of the global financial crisis and its implications ... · -5 0 5 10 15 20 jul-08 aug-08...
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Impact of the Global Financial Crisis and Its Implications for the
East Asian Economyby Takatoshi
Kato
Korea International Financial Association First International Conference
October 16, 2009
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The downturn in Asia was larger than expected on the basis of historic correlations
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G-2 Asia (excl. China and India)
Asia (excl. China and India)
Asia: 2008Q4 GDP Growth - Actual vs. Predicted1
(Quarter-on-quarter percent change, SAAR)
Sources: Haver Analytics; and IMF, WEO database; and staff estimates.
1 Based on a version of the IMF Global Integrated Monetary and Fiscal model (see N'Diaye, Zhang and Zhang, 2008).
The surprise in actual G-2growth overNov-08 WEO forecast
…would have implied this revision for Asia based on the model.
But the actual revision was much larger.
Figure 1
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Bank flows to Asia turned negative as major banks reduced their leverage
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International Claims of Reporting Banks vis-à-vis Asia(Change adjusted for exchange rate changes; in billions of U.S. dollars)
Source: Bank for International Settlements, Locational Banking Statistics , July 2009.
Figure 2
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External bond issuance came to a virtual halt in the last quarter of 2008
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Emerging Asia: External Bond Issuance(In billions of U.S. dollars)
Source: IMF, BEL database.
Figure 3
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Equity markets and local currencies, with the exception of the yen, recorded large losses
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Japan AustraliaNew Zealand IndiaIndonesia
Sources: IMF, Information Notice System; and IMF staff calculations.
Selected Asia: Nominal Effective Exchange Rates(January 1, 2008=100)
Figure 4
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The external shock fed through to domestic demand
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Hon
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hina
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Phili
ppin
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Thai
land
Private consumption Gross fixed investment Net exports
Sources: CEIC Data Company Ltd; and IMF staff calculations.
Selected Emerging Asia: Contributions to 2008Q4 GDP Growth(In percentage points; quarter-on-quarter seasonally adjusted)
Figure 5
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IP has regained much lost ground and in some cases returned to pre-crisis levels
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Japan Australia-NewZealand
China, India andIndonesia
Other emerging Asia
Peak-to-trough Trough to latest available data
Asia: Industrial Production during 2008-09(Percent change, seasonally adjusted)
Sources: CEIC Data Company Ltd; and IMF staff calculations.
Figure 6
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The IP rebound reflects an equally sharp rebound in export volumes
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Japan NIEs China
Peak-to-trough Trough to latest available data
Selected Asia: Volume of Exports during 2008-09(Percent change, seasonally adjusted)
Sources: CEIC Data Company Ltd; and IMF staff calculations.
Figure 7
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Domestic demand has also been playing a part in Asia’s rebound
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Japan Australia-New Zealand Emerging Asia 1/
Gross exportsDomestic demandGDP growth
Asia: Contribution to Recovery in Real GDP Growth(In percent, seasonally adjusted, non-annualized)
Source: IMF staff calculations.
1 Excludes China, India, Indonesia and Vietnam due to absence of a cycle and/or non-availability of data.
Figure 8
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Global financial conditions have eased, as evidenced by narrowing credit spreads,…
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Investment gradeHigh yield
Asia: Credit Risk - Itraxx Index(In basis points)
Source: Bloomberg LP.
Figure 9
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…renewed equity inflows,…
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India ASEAN-5 (excl. Malaysia)Taiwan Province of China KoreaJapan
Selected Asia: Net Equity Inflows(In billions of U.S. dollars)
Source: Bloomberg LP.
Figure 10
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…and recovering equity markets
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Emerging Economies: Stock Markets(MSCI Index, 1 Jan 2008=100)
Emerging Asia
Emerging Europe
Emerging Latin America
Figure 11
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The current rebound is to a large extent driven by a restocking of global inventories
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New OrdersInventories
United States: Manufacturing Orders and Inventory(Index, SA, 50+ = Econ Expand)
Source: Haver Analytics.
Figure 12
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Asia’s fiscal response has been larger than in the average G20 economy
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Industrial Asia NIEs ASEAN-5 China and India G-20
Asia average
Discretionary Fiscal Measures, 20091
(In percent of GDP, PPP GDP weighted)
Source: IMF staff estimates.
1 Defined as fiscal impulse (i.e. change in structural fiscal balances related to measures taken in response to the crisis).
Figure 13
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Strong exports reflect partly a gain in market share, as opposed to an increase in demand
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Market share of Korea Exports (percent, LHS)
REER (Jan. 1999=100, inversed, RHS)
Korea's Share in Global Export Markets
Sources: IMF, Direction of Trade, and Information Notice System.
Figure 14
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Asia’s dependence on demand from outside the region has not changed markedly
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Asian external demand
Non-Asian external demand
Sources: AIO 2000, and IMF staff estimates.
Selected Asia: Contribution of Intra-Asian and Non-Asian External Demand to Value Added(In percent of GDP)
Average over 1995-2000
Average over 2001-2008
Figure 15
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World output is projected to contract by 1.1 percent in 2009 and grow by 3.1 in 2010
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Real Gross Domestic Product(Percent;quarter over quarter annualized)
Source: IMF, Global Data Source database.
Figure 16
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Over the past years, global and Asian growth has been powered by U.S. consumers
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United States Euro AreaJapan Emerging AsiaOil exporters
Current Account Balances(Percent of world GDP)
Source: IMF, World Economic Outlook database.
Figure 17
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High asset prices had fueled an consumption boom that was unprecedented after WWII
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84Real home price index (LHS)Price-earning ratio (LHS)Consumption (RHS)
U.S. Consumption: Cyclical or Structural Correction?
Sources: CEIC Data Company Ltd; and Schiller, Robert J, "Irrational Exuberance," http://www.irrationalexuberance.com.
(1929=100) (Percent of GDP)
Figure 18
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Thank you