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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 »

financial crisis

China grew faster than its target and most projections in 2009 – what are the key takeaways?

Submitted by Louis Kuijs on Tue, 2010-02-02 16:08
Click image to enlarge.

China’s economy grew 8.7 percent in 2009. This was more than the 8 percent target, despite the global recession that caused global output excluding China to fall about 3 percent. China’s growth outcome is substantially higher than projections made in early 2009. For instance, in our  World Bank quarterly economic update (of which I am the lead author) we projected 6.5 percent GDP growth and some other forecasts were even lower (see Figure 1).

How did these forecasts come about, and what lessons we can draw from the experience of China’s growth in 2009? I cannot speak for my colleagues at the World Bank, let alone for other economists. But, all in all, while I have learned important lessons, I am not sure how differently I would see and do things if again presented with a situation like we were in a year ago.

Mongolia: Crisis increases demand for corporate governance

Submitted by Dave Lawrence on Wed, 2010-01-27 16:33

The President of Mongolia, Elbegdorj Tsakhia, sat at the table behind a Greek salad. We were at a lunch hosted by the Corporate Governance Development Center, an NGO which brings international best practices in corporate governance to Mongolia. Also present were the Minister of Education, the Director of the Financial Regulatory Commission (FRC), the Deputy Chief of Party of the USAID-funded Economic Policy Reform and Competitiveness Project (EPRC), which helped to establish the Center with the Institute of Finance and Economics, and CEOs of leading Mongolian firms. Several International Finanace Corporation (IFC) clients were among them.

The salad looked delicious, but it would have to wait. President Elbegdorj was speaking about the role of corporate governance in Mongolia. "Corporate governance is important for Mongolia's competitiveness," he said. I was delighted. I've been waiting a long time for this moment.

One year later: China’s policy stimulus results in strong 2009 economic growth, reason for optimism

Submitted by Gao Xu on Tue, 2010-01-26 11:07

This time last year, when the dismal 6.8% GDP growth data for China in the 4th quarter of 2008 came out, David Dollar, the former country director of China in the World Bank, asked in his blog whether one should interpret the data positively or negatively. (In other words, was the glass half full or half empty?) Compared with this uncertain situation a year ago, the Chinese economy is now in much better shape. Newly released data shows that the average GDP growth in 2009 is 8.7% – well above the most upbeat forecast made in early 2009. The growth even accelerated to double digits in the 4th quarter of 2009, standing at 10.7% (figure 1).

Largest ever World Bank loan to Vietnam signals country's swift path to middle-income status

Submitted by James I Davison on Thu, 2010-01-14 13:45

Last month, Vietnam and the World Bank signed the credit agreement for a loan that is historic for the rapidly developing country. Not only is it the largest ever World Bank loan to Vietnam, but it is also the first from its International Bank for Reconstruction and Development (IBRD) – meaning the country is a step closer to reaching middle-income status by this year.

A few days earlier, I caught up with Martin Rama, the Bank’s lead economist in Hanoi, and asked him a few questions. In a short video interview (embedded below), Rama explains why this $500 million loan, meant in part to strengthen public investment in Vietnam, is so significant to the country.

"This is a country that has had 20 years of spectacular growth without a substantial increase in inequality – with one of the fastest reductions in poverty that we have ever documented. There is much for Vietnam to be proud of."


  
Read more about the development policy loan to Vietnam here.

East Asia & Pacific: Risks to economic recovery from the return to business-as-usual in developed countries

Submitted by Ivailo Izvorski on Wed, 2010-01-13 10:57

The prediction season is in full swing, and prognosticators have, as usual, appended the warning that economic forecasts at this stage are subject to exceptional uncertainty.  Such exceptional uncertainty is always with us when looking ahead – there is always a fork in the road, no matter what the circumstances are. 

The nuance this year is that, while the recovery in East Asia will depend on prospects for the rest of the world, notably in the advanced economies, the outlook for those economies hinges on policies to address the causes of the financial crisis. Thus far, it’s clear that very little has been done to redress the regulatory issues that led to a near meltdown of the global financial system – while the rebound from the financial and economic crisis has been substantially stronger than anticipated only months earlier.  And these developments explain why opinions differ on the future path of regulatory reforms and their impacts.

Cambodia's economy in 2010: After unusual year, is recovery on its way for workers and entrepreneurs?

Submitted by Stéphane Guimbert on Wed, 2009-12-30 11:46

When I was asked to look back at Cambodia's economy in 2009 and ahead to 2010, I began to wish I had some magic tools such as this ox (although in that case, the ox was not that magical, since the 2009 harvest turned out to be quite good).

Cambodia’s year of 2009 was an unusual one. The sustained period of rapid growth – almost 10 percent for 10 years – came to an end. The 2009 growth forecasts are still being debated, between the International Monetary Fund (-2.75 percent), the World Bank (-2.2 percent), the ADB (-1.5 percent), and the Government (+2.0 percent). But the core issue is somewhere else: it is the fact that most citizens and investors were planning on continued rapid growth, and this did not happen in 2009. Those planning to send remittances to their villages could not do so. Those planning to sell their land for capital gains could not do so. We have seen imports of cars and motorbikes decrease, and some signs of debt distress for a few.

Thailand's economy in 2010: Growth in balance

Submitted by Frederico Gil Sander on Tue, 2009-12-29 15:01

In the years since the 1997/1998 Asian financial crisis, the Bank of Thailand (BoT) worked hard to build a heavy fortress around the nation’s financial sector. As a result, at a time when credit markets froze in developed countries and investors “fled to quality,” large amounts of capital still flowed into Thailand, where banks remained solid and well capitalized. Despite the financial strength brought by prudent policies, for the first time since the financial crisis, Thailand will see GDP and household consumption drop, and poverty could even increase in 2009. It is clear that the financial armor was insufficient to protect the economy from another crisis.

The culprit has been identified as Thailand’s excessive reliance on external demand, and talk of “rebalancing” growth towards domestic consumption and investment has become quite common (pdf). The idea of rebalancing makes some sense – but it can also be misleading. Let me explain.

Your questions about East Asia and Pacific's rebound from the crisis, answered by World Bank economists

Submitted by Claudia Gabarain on Sun, 2009-11-15 23:01

Almost like an audience-customized appendix to the World Bank's East Asia and Pacific Update November 2009, the live online chat held last Thursday by the regional Chief Economist, Vikram Nehru, and the lead author of the report, Ivailo Izvorski, answered a good number of questions in detail.

From diversifying Cambodia's economy to the right moment to suspend governments' stimulus packages, Vikram and Ivailo also touched on the effect of a weak US dollar in East Asian economies, on the challenges to generate domestic growth in export-dependent economies, and on the risks of inflation and asset price bubbles in the region, among others. Take a look at the transcript.

Submit questions on East Asian and Pacific economy for Nov. 12 online chat

Submitted by James I Davison on Tue, 2009-11-10 12:37

The World Bank’s latest economic assessment of developing countries in the East Asia and Pacific region, released a week ago, came to some interesting conclusions and attempted to answer a lot of questions on a complex subject. Notably, the report’s authors pointed to the major role China has played in the region’s swift rebound from the crisis.

Later this week, two World Bank economists will be answering your questions about the report in a live online chat. On Thursday, Nov. 12, at 10:00 a.m. Washington DC time (15:00 GMT or 11:00 p.m. Beijing time), join Ivailo Izvorski, lead economist and author of the report, and Vikram Nehru, Chief Economist for the East Asia and Pacific region to send questions and read their answers. You’re strongly encouraged to submit your questions in advance.

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.