When You Move, I Move: Increasing Synchronization Among Asia’s Economies


Romain DuvalBy Romain Duval

(Version in 中文, and 日本語)

In recent decades, trade integration within Asia has increased more than in other regions. In valued-added terms, intraregional trade grew on average by over 10 percent a year from 1990 to 2012, twice the pace seen outside of Asia. Likewise, financial integration within the region has started to catch up, although it still lags behind trade integration. Concomitantly, business cycles in Asia have become steadily more synchronized over the past two decades, with the correlation between ASEAN economies’ growth rates almost reaching the very high levels seen within the Euro Area.

As outlined in the IMF Asia and Pacific Department’s latest Regional Economic Outlook, these facts are related. Namely, increases in trade and financial integration have strengthened the propagation of growth shocks between regional partners, leading Asian economies to move more in lockstep. One driver of this synchronization of business cycles has been the increase in size and connectedness of China’s economy. Looking ahead, we expect regional integration agenda and a bigger China to further increase spillovers and growth co-movement across the region. Greater international cooperation, particularly regional and global financial safety nets, can help countries respond to the associated risk of more synchronized, sharper downturns, and thereby help Asia make the most of greater regional integration.

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The Art of Shifting Gear


By Anoop Singh

If you needed further evidence about the fallacy of Asia’s economy “decoupling” from that of the developed world, then this month’s Asia and Pacific Regional Economic Outlook would be a good place to look.

The findings in this new report,  just released in the Malaysian capital, Kuala Lumpur, illustrate how Asia’s economic fate remains heavily dependent on events far beyond its immediate borders.

Consider two possible future scenarios to illustrate this ongoing interconnectedness: if global prospects continue to brighten following recent, concerted policy actions in the euro area and, if there are further indications of recovery in the United States, this will all augur well for trade-dependent Asia.   Against this backdrop, the region could enjoy a boost in demand, fresh capital inflows and even a revival of overheating pressures.

But,  were the financial turmoil in the euro area to escalate and spread globally, this would likely result in a sharp fall in demand for Asia’s exports by advanced economies and a possible retrenchment of credit by stressed foreign banks, all of which would be a severe blow to Asia.

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Investing in a Rebalancing of Growth in Asia


By Anoop Singh

Continuing my travels through Asia for the launch of our October 2010 Regional Economic Outlook: Asia and Pacific, I am writing to you today from Singapore. In my last post, I focused on the near-term outlook and challenges for Asia. Today, I turn to the key medium-term challenge—the need to rebalance economies in the region away from heavy reliance on exports by strengthening domestic sources of growth. This is against a backdrop of the need to rebalance global growth that was emphasized over the weekend by the ministers of the Group of Twenty industrialized and emerging market countries.

Heavy reliance, arguably over-reliance, on exports is a common challenge across Asia. Yet, the policies to address it will differ among the countries in the region. Much of the public discussion focuses on ways to increase consumption, and this is something the IMF has written about extensively in the past. But the role of investment in rebalancing growth is equally important and something that should not be overlooked. Continue reading

Continuing the Momentum—Asia’s Updated Economic Outlook


By Anoop Singh

Asia’s leadership of the global economic recovery is continuing unabated. And, even though heightened risks mean there may be tough times ahead again, the region is well equipped to handle them.

Asia’s remarkably fast recovery from the global financial crisis continued in the first half of 2010, despite the recent tensions in global financial markets. In fact, GDP growth in the first quarter was generally stronger than we anticipated in our Regional Economic Outlook in April. And high-frequency indicators suggest that Asian economic activity remained brisk in the second quarter. Even more notable, this is true both for economies that escaped a recession in 2009, thanks to their relatively larger domestic demand bases (China, Indonesia, and India), and for the more export-oriented economies such as Japan, the Newly Industrialized Economies (NIEs), and the rest of the ASEAN.

Two growth engines

What explains the strong economic momentum across the region? It is simple. The two “engines of growth” that spurred Asia’s recovery in 2009— exports and private domestic demand—have remained robust in 2010.

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More Asian Geese Ready to Fly


(Version in 日本語)

Like geese flying in formation, the successive waves of Asian countries achieving economic takeoff and emerging or developed market status, has been likened to those migratory birds in flight.  If this model is accurate, more Asian geese are set to join the flock of economically successful nations.

The “Flying Geese Paradigm” or ganko keitai was first conceived of  by Japanese economist, Kaname Akamatsu in the 1930s as a way of explaining East Asian industrial development.  According to Akamatsu, the lead goose in the formation, was Japan.  The second tier consisted of newly industrialized economies—South Korea, Taiwan Province of China, Singapore, and Hong Kong SAR.  Following hot on their tails were the ASEAN countries, such as Indonesia, Malaysia, the Philippines and Thailand.  More recent additions to the flock are China and India

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