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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A Wish List for China’s Third Plenum


ASinghBy Anoop Singh

(Versions in 中文 and Español)

Hard landing, soft landing, no landing, overheating. Pundits’ views on China’s economy bounce around—often rapidly—between these descriptions.

Just two short months ago, the dominant concern was about a sharp slowdown, below this year’s official growth target of 7½ percent. Now, these fears have retreated, pushed aside by talk of renewed momentum.

Our sense, here at the International Monetary Fund, has always been that economic growth will slightly surpass this year’s official target. But we have also cautioned that China’s economic challenges are growing, and that accelerating reform is critical for containing risks and achieving a smooth transition to sustainable growth.

The upcoming Third Plenum provides an opportunity for the new leadership to provide guidance on how they plan to meet these challenges.

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Japan’s Abenomics: Time to Take Stock


ASinghBy Anoop Singh

Almost one year ago, the term Abenomics first surfaced in Japan. The idea of a coordinated policy effort to revive Japan’s economy and end deflation seemed a bold idea, but also a long-shot. Back in February, several young investment bankers told me that ending deflation within the next few years stood at most, a 20 percent chance.  They noted that they had never experienced rising prices in their lifetimes. By June they had upped the chances of success to 40 percent. With Abenomics approaching the one-year mark, is the new strategy working?

Lot of policy action

The year started with a flurry of new policy initiatives: in January, the Bank of Japan (BoJ) adopted a 2 percent inflation target, followed by new fiscal stimulus, and a decision to join  negotiations over the  Trans-Pacific Partnership (TPP), a proposal for a free trade agreement spanning countries from Australia, Brunei, to Chile, Canada, and the U.S.  Shortly after,  Haruhiko Kuroda took the helm at the Bank of Japan and introduced  Quantitative and Qualitative Monetary Easing—an aggressive plan to reach 2 percent inflation in about 2 years mainly through large-scale bond purchases. Just, a few days ago, the government agreed to go ahead with the consumption tax increase in 2014 and announced further fiscal stimulus to soften the growth impact. Discussions on growth reforms are next on the agenda, with a special Diet session starting this month. Plenty of action, but has this whirlwind of activity paid off?
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India: Linked or De-linked from the Global Economy?


By Anoop Singh

With economic growth expected to continue at a reasonably good clip this year and next, it’s all too easy to think there’s not much to worry about. Even as Diwali celebrations begin across India, the outlook for the world economy is fairly uneven and uncertain. More worrisome than the subdued global growth outlook, risks are building up especially in Europe—and these include an extreme scenario with financial disruption.

Although India’s economy has generally been less prone to external forces than many others, we still need to contend with the larger than typical risks in the global economy. These risks harken the need for a new wave of reforms.

What does the more somber darker global outlook mean for India? And exactly what policies are needed? Continue reading

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