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    Asia Economic Monitor: July 2011
    Asia Economic Monitor: July 2011
    Asia Economic Monitor: July 2011
    Ebook166 pages1 hour

    Asia Economic Monitor: July 2011

    By Asian Development Bank

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    About this ebook

    The Asia Economic Monitor is a semiannual review of emerging East Asia's growth and policy issues. It covers the 10 members of the Association of Southeast Asian Nations; People's Republic of China; Hong Kong, China; Republic of Korea; and Taipei,China. This issue includes a special section on managing commodity price volatility and inflation in emerging East Asia.
    LanguageEnglish
    PublisherAsian Development Bank
    Release dateJul 1, 2011
    ISBN9789290923756
    Asia Economic Monitor: July 2011

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      Asia Economic Monitor - Asian Development Bank

      Economic Performance

      Growth and Inflation

      Growth across emerging East Asia moderated in the first half of 2011 as authorities wrestled with rising inflation.

      Economic growth in emerging East Asia continued to ease in the first quarter of 2011, due to an inventory drawdown among the four newly industrialized economies (NIEs),¹ which led to slower investment growth. Tightening monetary policies combined with the withdrawal of fiscal stimulus may also have contributed to the growth moderation. Aggregate growth in gross domestic product (GDP) for the 10 largest economies in emerging East Asia² moderated to 8.1% year-on-year³ in the first quarter of 2011, down from the 8.4% expansion in the fourth quarter of 2010 (Figure 1). Growth in the People’s Republic of China (PRC) remained the strongest in the region, expanding 9.5% in the second quarter of 2011. In the four middle-income economies of the Association of the Southeast Asian Nations (ASEAN-4),⁴ GDP growth slowed to 5.1% in the first quarter from 5.7% in the last quarter of 2010. Similarly, economic growth in the NIEs eased to 5.6% in the first quarter from 6.2% in the final quarter of 2010. Leading indicators— exports, industrial production and retail sales—are also moderating, suggesting that growth will continue to ease in the second quarter (Figure 2).

      Figure 1: Regional GDP Growth¹—Emerging East Asia2 (y-o-y, %)

      ASEAN-4 = Indonesia, Malaysia, Philippines, and Thailand; GDP = gross domestic product; NIEs = Hong Kong, China; Republic of Korea; Singapore; and Taipei,China; y-o-y = year-on-year.

      ¹ Weighted by gross national income (atlas method, current $).

      ² Includes ASEAN-4, NIEs, Viet Nam, and the People’s Republic of China.

      Source: OREI staff calculations based on national sources.

      Figure 2: Merchandise Export, Industrial Production, and Retail Sales Growth¹—Emerging East Asia2 (y-o-y, %)

      y-o-y = year-on-year.

      Note: Exports in $ value; industrial production and retail sales in local currency.

      ¹3-month moving average. Data on industrial production and retail sales until Apr 2011.

      ²Includes the People’s Republic of China; NIEs (Hong Kong, China; Republic of Korea; Singapore; and Taipei,China); ASEAN-4 (Indonesia, Malaysia, Philippines, and Thailand); and Viet Nam.

      ³Excludes Hong Kong, China for which data are unavailable.

      ⁴Excludes Malaysia and Philippines for which data are unavailable.

      Source: OREI staff calculations based on CEIC data.

      While the contribution of consumption to growth has remained relatively stable, investment’s contribution declined significantly.

      In the first quarter, domestic demand continued to contribute to growth in most of ASEAN-4 and the NIEs (Figure 3). However, investment’s contribution to growth dropped substantially, given the steep reduction in inventories in the NIEs. There was a sharp slowdown in fixed investment in the NIEs, contracting 0.2% in the first quarter of 2011 after an increase of 6.3% in the last quarter of 2010 (Figure 4a). In ASEAN-4, fixed investment growth moderated to 8.4% in the first quarter of 2011 (Figure 4b). Consumption growth in both the NIEs and ASEAN-4 was steady as consumer confidence remained generally stable (Figures 5a, 5b). In the PRC, consumption growth showed signs of slowing as growth in retail sales moderated (Figure 6).

      Figure 3: Contributions to GDP Growth—Emerging East Asia ex PRC¹ (percentage points²)

      GDP = gross domestic product, PRC = People’s Republic of China, y-o-y = year-on-year.

      ¹Refers to ASEAN-4 (Indonesia, Malaysia, Philippines, and Thailand) plus NIEs (Hong Kong, China; Republic of Korea; Singapore; and Taipei,China).

      ²Based on y-o-y changes.

      ³For Singapore, uses revised 2011Q1 GDP growth while GDP components refer to preliminary data.

      Source: OREI staff calculations based on CEIC data.

      Figure 4a: Domestic Demand Growth—NIEs (y-o-y, %)

      NIEs = newly industrialized economies (Hong Kong, China; Republic of Korea; Singapore; and

      Taipei,China); y-o-y = year-on-year.

      Source: OREI staff calculations based on CEIC data.

      Figure 4b: Domestic Demand Growth—ASEAN-4 (y-o-y, %)

      ASEAN-4 = Indonesia, Malaysia, Philippines, and Thailand, y-o-y = year-on-year.

      Source: OREI staff calculations based on CEIC data.

      Figure 5a: Consumer Confidence Indexes—PRC and NIEs (January 2007 = 100)

      NIEs = newly industrialized economies, PRC = People’s Republic of China.

      ¹Latest data refer to May.

      ²Latest data are 2011Q1.

      Source: Bloomberg and CEIC.

      Figure 5b: Consumer Confidence Indexes—ASEAN-4 (January 2007 = 100)

      ¹Latest data are 2011Q1.

      Source: Bloomberg and CEIC.

      Figure 6: Retail Sales Growth¹—People’s Republic of China (y-o-y, %)

      y-o-y = year-on-year.

      ¹3-month moving average.

      Source: OREI staff calculations based on CEIC data.

      Despite tightening monetary policy, the PRC shows continued strong growth momentum.

      Growth in the PRC remained a robust 9.5% in the second quarter of 2011, marginally down from the 9.7% growth in the first quarter. Consumption and investment helped fuel the robust performance. Fixed asset investment remained high at 25.6% in June, little affected by tightening monetary policy so far (Figure 7). Industrial output growth in June remained stable at 13.9%. In contrast, export growth eased to 17.9% in June as external demand weakened, and imports moderated to 19.0% amid signs of slowing domestic demand (Figure 8).

      Figure 7: Fixed Asset Investment Growth—People’s Republic of China (nominal, year-to-date, y-o-y, %)

      y-o-y = year-on-year.

      Source: CEIC.

      Figure 8: Merchandise Export, Industrial Production, and Retail Sales Growth¹—People’s Republic of China (y-o-y, %)

      y-o-y = year-on-year.

      Note: Exports in $ value; industrial production and retail sales in local currency.

      ¹3-month moving average.

      Source: OREI staff calculations based on CEIC data.

      NIEs economic growth slowed as a drop in investment offset gains from higher net exports.

      In the first quarter of 2011, aggregate growth in the NIEs slipped to 5.6% as investment declined—mainly due to a reduction in inventories (Figures 9, 10). Exports remained strong but moderated somewhat in recent months due to weaker external environment (Figure 11). Singapore’s growth slowed sharply in the second quarter of 2011, growing by just 0.5% compared with 9.3% in the first quarter. The slowdown was largely due to declines in biomedical and electronics products. GDP in the Republic of Korea grew by 4.2% in the first quarter of 2011, supported by strong exports. Following strong growth of 7.1% in the final quarter of 2010, Taipei,China’s economic growth eased to 6.5% in the first quarter as inventory drawdowns offset stronger

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