If you are a visual learner like me, or you just happen to like nifty animated maps, a site called SHOW World may be worth spending an afternoon coffee/tea break or two to check out. Similar to the popular WorldMapper collection, this site displays a lot of data from a number of sources (including, apparently, the World Bank) in map form. On an Excel spreadsheet, the information would just look like numbers or a boring old graph.
|Local meets global in Ulaanbataar: ice sculptures of Chinggis Khaan in front of the popular Grand Khaan Irish Pub.|
|The global slowdown is hurting Cambodia's tourism industry, with fewer visitors in late 2008 than in the same period of 2007. Image credit: flydime at Flickr under a Creative Commons license.|
It's been a couple of months since the World Bank prepared the "perfect storm" report on the recent economic developments in East Asia. Our view at the time was that the crisis would reveal some of Cambodia's economic vulnerabilities – i.e. its lack of export diversification and its extreme reliance on foreign investment for growth. I think that this is an important lesson from our recent analysis on growth in Cambodia (more on this later).
Our projections for 2009 at the time were just below 5 percent GDP growth. This is consistent with the projections of the Government, the IMF, the Asian Development Bank, and an International Labor Organization (ILO) report on the impact of the crisis released yesterday. The Economist Intelligence Unit has a more pessimistic projection of 1 percent.
So who is right?
Well, the bad news continues across the East Asia and Pacific region. The Financial Times just ran a long article on the "speed and ferocity of the region's economic downturn." The piece highlighted that the fast downturn was a result of Asia's over-reliance on export-led growth over the past decade. This follows the IMF's slashed growth forecasts for the large East Asian economies. It projected only 5.5 percent growth across developing Asia for 2009, which sounds great for most economies these days, but it is way off of the 7.8 percent posted last year.
The IMF is expecting only 6.7 percent growth in China, which is 1.8 percent less than what they forecast only in October. This contrasts sharply with the view of the World Bank's Chief Economist, Justin Lin, who just two weeks ago said he thought China could achieve the target rate of growth – 8 percent – this year because of fiscal stimulus spending.
|Chinese Premier Wen Jiabao as optimistically predicted his country’s growth in 2009. Image credit: worldeconomicforum at Flickr under a Creative Commons license.|
A story that stuck out at me came from the New York Times, which quoted Wen Jiabao, the Chinese premier, as optimistically predicting the country’s growth in 2009 at 8 percent. That’s pretty optimistic compared to many other economist predictions – some as low as 4 percent or less for the year.
You could read the new GDP data from China as very negative or surprisingly positive.
"The East Asia and Pacific Region has not been spared the full fury of the economic storm." – East Asia & Pacific Update
|China’s stimulus package, announced this week, focuses on more than just building up the industrial and export capacity. Some investments will also be in housing, schools, and health facilities.|
China announced a massive stimulus package of 4 trillion Yuan (US$570 billion) this week, to aid its ailing economy. The move was quickly welcomed by World Bank President Robert Zoellick: "China is well positioned given its current account surplus and budget position to have fiscal expansion," said the World Bank chief at a news conference. "I am delighted that China decided not only to undertake these steps, but to announce it before the G20 summit," he added.
Basically, I think that the package is very good. It is not as big as it looks at first glance, but then the economy is not as bad as many people think. Real retail sales for October came in at 17 percent growth rate, down trivially from 18 percent in September. Exports in October were up 19.2 percent over the year before. There is definitely evidence of a slowing economy, but nothing too dramatic has happened so far. Worrying signs, such as a sharp drop in growth of electricity demand in October, suggest that heavy industry is slowing. And imports for processing have slowed to a 2-3 percent growth rate, indicating that processing exports will slow down sharply. We have said for some time that China needed to be ready with a stimulus package toward the end of 2008 as global conditions would likely lead to a slowdown, and that time has come. I see the current move as precautionary, in light of some worrisome signals, rather than as reactive to a highly deteriorated situation (as suggested in some of the Western press coverage).
|Although exports have slowed down, they contributed to China's GDP growth in 2008. But in this gloomy global economy, some factories will close and workers will lose jobs as it slows down further.|
The details of the third quarter report provided some good news. Exports are slowing gradually, but still contributed to the GDP growth in 2008. Retail sales growth hit its highest level in nine years and was at 18% in real terms in September. So far, Chinese consumption is holding up. And the easing of inflation to under 5% means that the government has scope to loosen monetary and fiscal policy. The government is planning to respond to the potential for further growth declines with accelerated spending on reconstruction of the earthquake-affected areas and with infrastructure projects more generally.