Renewed capital inflows at the turn of the year helped ease tight liquidity conditions that prevailed toward the end of 2011. Foreign exchange and financial markets have rebounded this year as global liquidity conditions improved, but sustaining the rally will increasingly depend on developments in the real economy. While most of the leading emerging market economies in Asia weathered the global financial crisis and have been able to cope with recurrent bouts of turmoil, the reliance on export-led growth means they are vulnerable to a prolonged softening in external demand. Lower inflation and renewed uncertainty about the economic outlook have prompted central banks in China, India, Indonesia and Thailand to start easing policy. Small budget deficits, low external debt and large reserve holdings provide the wherewithal for such policy action, but more aggressive steps need to be taken to counter weak export growth.
- Exports for the leading emerging markets in Asia were 10% greater in the fourth quarter of 2011 than a year earlier, down from 19.5% in the third quarter, 21% in the second quarter and 27% in the first quarter.
- Real GDP growth for the region, which rebounded from 6.8% in 2009 to 9.4% in 2010, eased to 7.5% in 2011 and is set to moderate to 7% in 2012.
Asia/Pacific Publications
Country Publications
-
India: Monetary Easing Advances
April 27, 2012The central bank recently cut the policy rate for the first time in three years after initiating monetary easing by lowering reserve requirements in late January and mid-March. While the rate cut is aimed at giving a boost to investment and growth, three key risk factors are likely to constrain the scope for near-term easing.
Read More -
Korea: The Household Debt Problem
April 24, 2012Despite the low level of unemployment and the absence of financial dislocations that have hampered growth in many of the mature economies, consumer spending is likely to remain constrained by the high level of household debt.
Read More -
India: Fiscal Challenges Remain
April 23, 2012The recent budget calls for a modest deficit reduction, but meeting the target requires following through with domestic fuel price hikes to check subsides. Moreover, achieving planned asset sales is important to avoid an increase in the large borrowing program, while advancing long-overdue revenue-raising reforms remains key for fiscal consolidation to take hold.
Read More -
China: Emergence of the Trust Industry
April 12, 2012The rapid growth of the trust industry has made it an important part of the domestic financial system outside the scope of the banking sector. The adoption of more stringent regulatory requirements reflects official efforts to prevent a repeat of the boom-bust cycle that the trust sector went through in the 1990s.
Read More -
Indonesia: The Risk of Rising Oil Prices
April 10, 2012The government remains committed to a small budget deficit and low public debt, although the failure to hike administered domestic fuel prices closer to market levels leaves fiscal policy exposed to an oil price shock. A long delay in adjusting prices also threatens to undermine investor and credit confidence.
Read More -
Philippines: Exports Aren't Everything
March 28, 2012Last year’s contraction in exports gave the county the dubious distinction as the worst performer in the region. Weaker import growth and a steady stream of inflows from workers abroad cushioned the impact on the balance of payments.
Read More -
Philippines: Going for Growth
March 12, 2012Slowing growth and falling inflation prompted the central bank in March to shift to an accommodative stance. Macroeconomic stability has bolstered the economy against recurrent global financial turmoil, and monetary easing should pave the way for a strong revival in growth.
Read More
Regional Publications
-
Vehicle Sales Shift into Low Gear
December 21, 2011Growth in vehicles sales slowed during the past year, due partly to supply dislocations in Japan and Thailand. Although the auto sector helped revive growth in the aftermath of the global financial crisis, it would be hard to replicate another boom cycle like the one that occurred in 2010.
Read More -
A Look at Key Sales Trends
August 05, 2011The recovery of the leading emerging markets in Asia from the global crisis has been fading. Part of the moderation is a natural consequence of resuming normal economic and financial trends after the global financial crisis. The economic dislocations in Japan have also weighed on growth of the region.
Read More -
Chiang Mai Produces $120 Billion
April 01, 2010The recent activation of the Chiang Mai Initiative Multilateralization (CMIM) advances a decade-long ASEAN+3 consultative process to set up a regional financing vehicle, although the CMIM is probably more important for its symbolism than its substance.
Read More
Member Only Content