GlobalRecessionandItsImpactontheAsianEconomyDr.BernardoM.VillegasNovember2008BlackThursday1929StockMarketCrashPassiveFederalReserveSystemIgnoranceofKeynesianPumpPrimingPanicintheBankingSectorUnemploymentRateof25%CompleteDominanceoftheUSEconomyintheWorldWorldFinancialMarketIlliquidBlackMonday2008RealEstateBubbleProactiveFederalReserveSystemUSGovernmentPumpPrimingNoPanicintheBankingSectorNoCrashintheStockMarketUnemploymentRateManageableCountervailingPowerofEmergingMarketsLiquidityofSovereignFundsMassiveinterventionofEuropeangovernmentsGrowthRatesofMajorEconomiesF–forecastsSource:WorldEconomicOutlook,IMF,Oct2008TraditionalEnginesofGrowthWorldGrowth(GDPGrowthRates)F–forecastsSource:WorldEconomicOutlook,IMF,Oct2008TraditionalEnginesofGrowthGlobalGrowthSlowdownFinancialmeltdownintheU.S.HighratesofinflationTightcreditdespitelowerinterestrateHighalbeitmoderatingfoodandfuelpricesSlowdownintheEUandJapanTheU.S.twin(fiscalandtrade)deficitscontinuetocauseconcernThreatstoWorldGrowthU.S.Economy:

StillnoendtofinancialturmoilHugelossesinthefinancialsectorStilluncertainresultsofU.S.governmentbailoutsoffailingbanksPreviouslyrobustprivateconsumptionspendinghasbeendepressedbytheslumpinthehousingmarketRealGDPgrowthtofallfrom2.0%in2007to1.6%orlowerin2008EuroAreaEconomyActivityinWesternEuropegatheredmomentumin2006.GDPgrowthintheEuroareareached2.8%,doubleitspacein2005Slowingofgrowthin2008to1.3%from2.6%in2007FallinghousinginvestmentsGrowthshouldremainrelativelystrongerinGermanysustainedbygoodexportperformanceinthefaceofweakerconsumerdemandTheslowdownwillreflectanuptickinunemploymentintheEuroarea,especiallyinSpainJapaneseEconomyPoliticalinstabilitycausedbysuccessiveresignationsoftwoPrimeMinistersDespiteastrongerthanexpectedGDPoutturninthefirstquarterof2008,Japan’seconomicoutlookisweakfor2008and2009.TheyenweakenedagainsttheU.S.dollarinJunebutmaystrengthenifU.S.economycontinuestobetroubledbyfinancialcrisis.Consumerpriceswillrisein2008ReservesmaybeusedtohelpailingbanksintheAsianregionWorld’sLargestEconomiesGDPGrowthRatesAsianFinancialCrisisSource:ADBKeyIndicators2002GDPGrowthRatesAsia:TheMostDynamicRegionEmergingEnginesofGrowth

BRICAEmergingEnginesofGrowth

TheNextElevenEmergingEnginesofGrowth

GDP%ChangeOverheatingeconomy:possiblecreditandstockmarketbubbleInflationratereached6.5%inOctober2007,thehighestmonthlyinflationin11yearsEffortstocooldowneconomymayresultinhardlandingUnderdevelopedbankingsectorUndervaluedcurrencyUncontrolledlocalofficialsShortageoflocalentrepreneursandmanagersHighratesofpovertyStricterregulationsinITThreatsinChinaBRICAOpportunitiesinChinaGDPgrowthof8%oroverforthelasttwodecadesDomesticmarketofsome250-300millionhigh-incomeconsumersHighrateofinvestmentat50%ofGDPForeigndirectinvestments(FDIs)ofUS$60billionormoreyearlySurgingrawmaterialdemandGreaterintegrationofChinaandotherAsiancountries(e.g.ASEAN+China)DemandformiddlemanagersBRICAASEANGDPGrowthRatesandPerCapitaIncomeBRICADomesticMarketsSource:ADBKeyIndicators2007BRICASavingsandCapitalFormation

Source:ADBKeyIndicators2007BRICAAsianEconomicTrends2008-2010Domesticmarketsasenginesofgrowth:doubletrackstrategyChinaasengineofgrowthoftheAsiaPacificregionThepredominanceofChinainmanufacturingGrowthinintra-regionaltrade:increasedcomplementarityContinuingbattleagainstmasspovertyinthebigeconomiesOutsourcingofmanufacturingandservicestoAsiaOutsourcingisintra-companyaswellasinter-countryFocusonagriculturalproductivityinSoutheastAsiaTheemergenceofSMEsandmicroenterprisesThe“entrepreneurialchallenge”tocentrallyplannedeconomiesThechallengeofinnovationsandproductivityConsumerTrendsinAsiaNon-incomeconsumptionfactorsExpandingmiddleclassDiversityofconsumertastesandlifestyles“Mallification”ofAsiancitiesDemographicgiftstageinSouthandSoutheastAsiaRapidaginginNortheastAsiaandSingaporeWidespreaduseofEnglishThetelecomrevolutionSpreadofuniversityeducationSelectedSunriseIndustriesinAsiaAgribusinessMiningTripleTs:Transport,Telecom,andTourismInfrastructuresAutomobilesConsumerdurab