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Economic outlook & challenges for asean MOHAMED ARIFF

Economic outlook & challenges for asean MOHAMED ARIFF. Sluggish growth in major industrial economies. Steady growth expected in developing Asia. Southeast Asia pales somewhat. Domestic demand plays an important role. Intraregional trade is on the rise. Exports to developing Asia.

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Economic outlook & challenges for asean MOHAMED ARIFF

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  1. Economic outlook & challenges for aseanMOHAMED ARIFF

  2. Sluggish growth in major industrial economies

  3. Steady growth expected in developing Asia

  4. Southeast Asia pales somewhat

  5. Domestic demand plays an important role

  6. Intraregional trade is on the rise Exports to developing Asia

  7. Mounting inflationary pressures Inflationrates, latest month 2010 average: 4.4% 2009 average: 1.2%

  8. Rising commodity prices

  9. Inflation higher than previously forecast, but deceleration in 2012?

  10. Some cases of negative real interest rates

  11. Capital inflows are recovering

  12. Relatively low levels of sovereign debt, but caution is in order Gross government debt, 2010

  13. High reserves, a good insurance? • Import cover, 2010

  14. Greater volatility is expected • Two competing forces: • Lure of ASEAN’s strong fundamentals • Reduction in investors’ risk appetite due to uncertainty in the global environment Policy makers need to prepare for more volatile capital flows

  15. Risks to the global economy • Sovereign debt burden • Sedated US economy • The Eurozone at the brink of a recession • Economic stagnation in Japan • Deceleration of growth in China and India • No immunity for East Asia • The world economy to cave in? • Can China save the world economy?

  16. Post-2015 Scenario • The global economy settling in at a new equilibrium after rebalancing • The US to regain its clout as economic powerhouse, albeit on a subdued level, as it will save more and spend less • Intra-regional trade to gain greater prominence for ASEAN in the face of slower extra-regional export growth • Domestic and regional demand to be the main driver of economic growth for ASEAN

  17. Risks to economic growth warrant regional solutions • Rebalance growth • Make growth more inclusive • Seek resilience through market integration • Strengthen monetary cooperation • Go for greater fiscal coordination • Pursue open regionalism • Stay competitive in the global arena

  18. Global Competitiveness: ASEAN GCI 2010/11 GCI 2011/12 Rank Score Rank Score Singapore 3 5.48 2 5.63 Malaysia 26 4.88 21 5.08 Brunei 28 4.75 28 4.78 Thailand 38 4.51 39 4.52 Indonesia 44 4.43 46 4.38 Vietnam 59 4.27 65 4.24 Philippines 85 3.96 75 4.08 Cambodia 109 3.63 97 3.85 Source: The Global Competitiveness Report

  19. ASEAN: Labor Productivity Growth (%) 2009 2010 2011 Cambodia -0.90 4.66 4.40 Indonesia 2.26 2.83 5.37 Malaysia -3.78 4.96 3.31 Myanmar 6.36 8.54 3.83 Philippines -1.66 4.73 2.29 Singapore -2.40 9.16 2.76 Thailand -4.12 6.87 2.69 Vietnam 2.49 3.94 3.98 Source: Malaysia Productivity Corporation (MPC)

  20. ASEAN Total Factor Productivity Growth (%) 20062007 2008 2009 Cambodia 11.55 4.26 1.03 -3.99 Indonesia 1.29 0.52 0.90 -0.36 Malaysia 2.33 2.58 1.64 -4.93 Philippines 2.46 3.33 0.99 -2.45 Singapore 0.37 3.01 -6.50 -3.66 Thailand 1.55 1.40 -1.16 -5.47 Vietnam 0.38 0.21 -1.86 -2.28 Source: Malaysia Productivity Corporation (MPC)

  21. Key Messages • The global economy to experience slower growth, as the US and EU economies rebalance. • Inflation to decelerate • To adjust to the sluggish global economy, ASEAN must accelerate structural reforms • To be globally competitive, ASEAN must close rank and act as a single entity • ASEAN must take advantage of its youthful population while preparing for demographic transitions over the medium term

  22. Ff Thank you

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