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East Asia & Pacific is facing some great development challenges today: urbanization, protection of the environment, the need to find renewable energy sources and many others. This site wants to create a conversation around those important issues. More »

economic forecast

In Thailand, finding the way back into growth: Step 1, switch the supply chains back on

Submitted by Frederico Gil Sander on Wed, 2009-11-04 12:35

As part of its regular monitoring of the corporate sector in Southeast Asia, the World Bank economic team I am part of in Thailand has been working on a short case study of supply chains of Japanese multinational companies (MNCs) in the electrical and electronics (E&E) industry. We wanted to hear directly from firms about how the crisis affected them, how they were able to adjust so quickly to the drop in demand, what the rebound looked like, and what were the prospects going forward to upgrade along the value chain. I have learned a great deal from these interviews, and have become convinced that supply chains are central to understanding the current crisis in Thailand and East Asia more generally.

Some facts: the crisis had a disproportionate impact on manufacturing. In Thailand, manufacturing represents about 40 percent of GDP, but contractions in manufacturing value added have accounted for about 75 percent of the contraction of headline GDP. Within manufacturing, the auto and E&E industries account for the bulk of the contraction. Most of the output in those industries is exported, and more than three-fourths of the decline in Thai exports during the crisis was due to falls in shipments from the auto and E&E industries. My conclusion is that the magnitude of the crisis in Thailand has been driven primarily by these two industries.

Health restored? Uncertainty in forecasting Thailand's economic outlook

Submitted by Frederico Gil Sander on Tue, 2009-09-22 14:05

In Laos, the government has reportedly already healed the economy from the economic flu. But in Thailand, there seems to be more uncertainty about the health of the economy, and some commentators are not ready to call the recession over. The Thai economy contracted by 4.9 percent from the previous year in the second quarter of 2009, better than the 7.1 contraction posted in the first quarter. What can we expect for the rest of 2009 and 2010?
 
This is very timely question for all World Bank economists in East Asia, who are currently finalizing their forecasts for the upcoming East Asia and Pacific Update economic report, to be launched in November. On my end, I am writing this post from Cambodia, where I am meeting with palm readers, fortune tellers and other economic healers to ensure highly accurate forecasts. Let me offer a preview of what the soothsayers are saying.

China's import surge: standard economic theory prevails

Submitted by Louis Kuijs on Wed, 2009-08-05 17:07

When China’s government started to work on and implement its massive stimulus program in November last year in light of a rapid deterioration of the world economy, economists working on China had to work out what it all meant for China’s growth, the composition of growth, and the rest of the world.

Many foreign observers doubted that the stimulus would be effective enough to boost domestic demand in the first place. But even among those with higher expectations in this regard—like we at the World Bank—many wondered what the stimulus would mean for the rest of the world.

Usually, when one country grows much faster than other countries, we expect imports into that country to rise much faster than exports (or, fall much less). However, in the case of China, exports had for quite some time been outgrowing imports by a large margin and many were skeptical that this would change even as economic conditions were changing in a pronounced way.

How can China keep on growing while its exports are shrinking?

Submitted by Louis Kuijs on Wed, 2009-06-17 22:05

Getting a clear view on where China’s economy is heading is not easy at the moment, as evidenced by large variations in GDP growth forecasts. One of the confusing developments is that while exports have continued to do badly recently, the domestic economy has exceeded most observers’ expectations by a wide margin.

Working in recent weeks on the World Bank’s new China Quarterly Update, released today, we have been trying to determine how the economy has been doing on balance, what the prospects are, and what this means for economic policy. In this blog, I will summarize our understanding of recent developments and prospects, leaving the upshot for economic policies for a later discussion (keep reading after the jump).

Live online chat with World Bank economists on April 16

Submitted by James I Davison on Tue, 2009-04-14 15:50

"There are signs that the strongest economy in the region, China, is beginning to turn the corner. ... A return to stronger economic expansion in China next year should help support growth among the countries of the East Asia and Pacific region."

Despite an expected surge in joblessness and shrinking GDP growth forecasts in many of the region's countries, the World Bank's latest East Asia and Pacific Update, released last week, highlights China as a hope for leading the way to recovery. The biannual assessment of the region's economic health predicts economic activity in China to bottom out by midyear.

This week on Thursday, you'll have a chance to ask questions to the World Bank economists in a live online chat. Lead Economist and author of the report Ivailo Izvorski and Vikram Nehru, Chief Economist for the East Asia and Pacific region, will answer questions on April 16 at 9:30 a.m. U.S. Eastern time (13:30 GMT). Be sure to submit your questions in advance for a better chance of having them answered. Check it out here.

Seeing the financial crisis: What might contraction look like in Cambodia?

Submitted by Stéphane Guimbert on Tue, 2009-04-07 01:53

Declining revenue of tuk-tuk drivers in Cambodia shows even the informal sector isn't insulated.

Growth forecasts in Cambodia are generating a fair bit of confusion. Many simply question whether it is possible for GDP growth to be lower in 2009 than in the past 15 years.

The World Bank today launches its projection of a 1 percent contraction of the Cambodian economy. This is based on an analysis of available statistics and feedback from a range of economic actors. Yet, to most of my Cambodian friends, it remains hard to conceive.

It is true that "seeing" such a contraction will be difficult. Basically, what it means is that economic activity in 2009 will be pretty much the same as in 2008. So the fact that we continue to have traffic jams in Phnom Penh, see tourists at the Royal Palace, and hear construction machines in many residential areas is consistent with such a projection. What will change, though, is that incomes will not increase this year as fast as past years and it will also become more difficult for the 250,000 young people leaving school each year to find their first job. What also will be different is that with no growth in aggregate, there will be a proportion of those with a livelihood at the end of the year worse than at the beginning.

East Asian and Pacific countries look to China for possible recovery, says World Bank report

Submitted by James I Davison on Mon, 2009-04-06 23:01

Despite a surge in joblessness and a regional drop of the forecasted GDP growth to 5.3 percent expected in 2009, developing East Asian and Pacific countries may be able to look to China for hope during the current global economic slowdown. That's according to the World Bank's April 2009 edition of the East Asia & Pacific Update, which was released today.

The latest half-yearly assessment of the region's economic health, aptly titled "Battling the Forces of Global Recession", says there have already been signs of China's economy bottoming out by mid-2009. China's possible subsequent recovery in 2010, concludes the report, could contribute to the entire region's stabilization, and perhaps recovery.

There are a number of ways to review the findings of the report on the World Bank's website. Head over to worldbank.org/eapupdate to view specific chapters or download the full report. For an intimate view of people who are being affected by the ongoing financial crisis in East Asian and Pacific countries – including Cambodia, Thailand, Mongolia and the Philippines – check out "Faces of the Crisis". You can also view hi-res graphs from the report here.

Also, check back here in the next day or so for blog posts written by World Bank economists based in Cambodia and Lao PDR.

UPDATE: For country-specific expert perspectives on the new World Bank repot, check out blog posts from World Bank economists based in Cambodia and Laos. Stéphane Guimbert considers what contraction might look like in Cambodia. And Katia Vostroknutova takes a look at Laos' economy, which is less affected by crisis, but faces the increasing challenge of sustaining growth during the crisis.

Regional roundup: Finance in East Asia – April 3

Submitted by James Seward on Fri, 2009-04-03 09:43

I'm sorry it has been a while since the last East Asia & Pacific regional roundup. A lot has happened, so let's get right to it. As usual, the downward trends continue across the region. The Asian Development Bank just came out with their Development Outlook report and their growth forecasts for this year for emerging markets are bleak – only 2.3% growth in Southeast Asia and 4.7% for the region. The average is pulled up by China, where ADB's estimate for growth is 7%, which is slightly above the World Bank's forecast of 6.5% for China.

The rate of change is dramatic since 2007 when the regional average growth rate was and average of 8%. The countries most dependent on exports were hit the hardest, such as Cambodia, Thailand, Malaysia, Korea, and China. Speaking of which to give the latest examples include Korea, where exports declined by 21% in March, but the good news was that this drop was less than the 26% decline in the first two months of the year. Korea also experienced a 10.3% decline in industrial output in February.

Your questions on China's economy answered - see the transcript

Submitted by James I Davison on Thu, 2009-03-26 14:38

In case you weren't able to join World Bank economists and regular bloggers David Dollar and Louis Kuijs earlier today in a live online chat, a transcript from the in-depth discussion is available here. David and Louis spent an hour and a half answering more than 30 questions about the recently released China Quarterly Update economic report, as well as topics ranging from foreign trade, health care reform and the long-term impact of the financial crisis on China's economy.

Also, recently on the blog David wrote about the data behind the Bank's recent economic report in, "Reading tea leaves for signs of China's recovery," and Louis wrote about the policy choices facing the country in, "China and stimulus packages: the best way to respond to more bad news?"

Do you have any follow-up questions about the report or China's economy? Submit them in the comments section below.

China and stimulus packages: the best way to respond to more bad news?

Submitted by Louis Kuijs on Tue, 2009-03-24 13:57

A few days ago, our country director David Dollar blogged about the two-sided picture we see when we look at China's economic growth. The economy saw very weak export demand, which partly carried over into weak investment in manufacturing and other "market-based" sectors. Continued growth in other parts of the domestic economy was supported by policy stimulus.

China has weathered the crisis better than many other countries because it does not rely on external financing, its banks have been largely unscathed by the international financial turmoil, and it has the fiscal and macroeconomic space to implement forceful stimulus measures. China’s government has made use of this policy space by pursuing pretty forceful fiscal and monetary stimulus. From early November last year onwards, the government's 10-point plan ("RMB 4 trillion package") is being implemented. This plan emphasizes infrastructure and other investment, financed in part by government budget spending, and in part by bank lending. And the government has taken some additional, more consumption-oriented measures.