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Asia Economic Outlook and Implications for Cambodia

Asia Economic Outlook and Implications for Cambodia. Presentation at the Royal School of Administration Olaf Unteroberdoerster IMF Mission Chief for Cambodia. Phnom Penh May 2 , 2013. Outline and Summary. Global Setting. Tail risks are receding, but still considerable.

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Asia Economic Outlook and Implications for Cambodia

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  1. Asia Economic Outlookand Implications for Cambodia

    Presentation at the Royal School of Administration Olaf Unteroberdoerster IMF Mission Chief for Cambodia Phnom Penh May 2, 2013
  2. Outline and Summary Global Setting Tail risks are receding, but still considerable Activity indicators stabilizing Robust domestic demand Strengthening external demand Inflation remains low Asia Outlook Financial Imbalances: New Challenges for Emerging Asia and Cambodia Improved financial conditions Stronger capital inflows Financial imbalances building Common policy challenges: Need for rebuilding space Scope for macroprudential measures
  3. Global Setting Global tail risks are receding… Selected Europe: Sovereign CDS Spreads (CDS Spreads in basis points, 5-year senior debt) Advanced Economies: Stock MarketPerformance (Index; December 31, 2010 =100)
  4. Global Setting …but growth in G2 set to remain sluggish Advanced Economies: Manufacturing PMI (Seasonally adjusted; 50=neutral) Advanced Economies: Consumer Confidence Index (Standardized using historical average) 1
  5. Asia Outlook Growth in Asia slowed through 2012, and inflation moderated Asia: Headline Inflation1 (Year-on-year percent change) Asia: Changes in Real GDP at Market Prices (In percent)
  6. Asia Outlook Near-term outlook: gradual growth pickup Indicator Model for Asia: Projectedvs. Actual Real GDP Growth (In percent;q/q SAAR) Real GDP Growth in 2013 (WEO forecast; In percent)
  7. Asia Outlook …underpinned by robust domestic demand Asia: Contributions to Projected Growth (In percentage points; year over year)
  8. Internal demand dynamics are becoming more favorable Selected Asia: External Dependence (Value-added basis; average 2005-10) ASEAN Intraregional Exports by Category (In percent of total exports in each category)
  9. Asia Outlook Inflation should remain within central banks’ explicit/implicit targets Asia: Headline Consumer Price Inflation1 (In percent; year over year)
  10. Risks Global risks have become more balanced, but considerable downside risks remain. Asia: Real GDP Growth (Central forecast and selected confidence intervals; in percent)
  11. Risks Financial stability risks amid renewed capital inflows and robust credit growth? Emerging Asia: Equity and Bond Funds—Weekly Net Flows during 2010‒13 1 (In billions of U.S. dollars) Asia: Change in Credit to GDP, 20121 (In percentage points)
  12. Risks Financial stability heatmap:moderate risk buildup in Asia Financial Stability Heatmap
  13. Risks Corporate balance sheets generally sound Selected Asia: Nonfinancial Sector Corporate Debt-to-Equity Ratio1 (In percentage points; cap-weighted mean; 2011)
  14. Risks Banks’ buffers increasing, although below international comparators in some cases Selected Asia: Commercial Banks' Loss-Absorbing Buffers1 (In percent of risk-weighted assets; asset-weighted mean)
  15. Risks Cambodia: Rapid credit growth increasingly fuelled by foreign funds Monetary Developments, 2008-12 (Contribution to broad money growth, in percent)
  16. Risks Cambodia: When is credit growth too fast? Credit to GDP Relative to Peers (In percent) Credit Gap (In percent)
  17. Policy challenges Macroprudential and capital flow measures: Remain essential for financial stability… Selected Asia: Use of Macroprudential and Capital Flow Management Measures, 2010-13 1
  18. Policy challenges Cambodia: High dollarization and foreign inflows limit effectiveness of conventional tools Dollarization (In percent) Effective Required Reserves (In percent)
  19. Policy challenges There is a need for rebuilding monetary and fiscal policy space Selected Asia: Policy Rates (In percent; as of December, 2012) Selected Asia: Cyclically Adjusted Fiscal Balance (In percent of GDP)
  20. Policy challenges Cambodia: Fiscal buffers also key for stability and medium-term growth Cambodia: Fiscal Trends (In Percent of GDP) Selected Asia: Tax Revenue (In Percent of GDP)
  21. Policy challenges Cambodia: A longer-term growth lesson 25th/75th percentile 10th/90th percentile Median 1950–2011 (normalized to 100 at t = 0, the year before the start of a strong growth episode; median economy; years on x-axis) Korea 1961 Brazil 1961 Cambodia 1996 Mozambique 1996 Indonesia 1983 Note: LICs exclude countries experiencing or recovering from a serious external or internal conflict at the start of their takeoffs.
  22. To wrap up… Near-term growth prospects for Asia have improved, although global recovery remains fragile and subdued Easy global and domestic financial conditions and prospect of continued capital inflows require vigilance in monitoring build-up of potential financial stability risks Macroprudential tools have a role to play along a move toward rebuilding monetary and fiscal policy space For Cambodia, strengthening the conventional monetary tools will also be important while fiscal buffers remain the anchor of macroeconomic stability
  23. Thank you
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