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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

Most central banks in East Asia need to raise rates to nip inflation in the bud

Submitted by Ivailo Izvorski on Sun, 2010-11-07 16:26

Amid the robust recovery from the global economic and financial crisis, policymakers in East Asia are contending with two emerging challenges: rising inflation and surging capital inflows.  The quickening of the pace of price increases would require further monetary tightening, but many officials and analysts worry that such tightening will help support further flows.  On balance, central banks in the region seem to have been rather patient in raising policy interest rates.  But delaying monetary tightening in the hope that capital inflows will go away will likely be in vain: most capital flows come because of higher growth prospects for East Asia than in advanced economies.  Policymakers need to bite the bullet and hike policy rates to keep inflation from rising unduly and higher inflation expectations to become entrenched. 

Such action could be seen as part of a broader effort to bring inflation in the region substantially down over the medium term – thus reducing short-term interest rates and ultimately the cost of sterilizing exchange market intervention.  There are plenty of examples around the world.  In the late 1990s, Poland  - shortly after introducing an inflation targeting framework – embarked on an aggressive monetary tightening cycle that reduced inflation and inflation expectations dramatically.  Growth suffered for a year or two, but ultimately Poland’s economic growth returned with a vengeance.  And in 2009, the country was the only one that recorded an economic expansion in the EU.

World Bank economists for East Asia and Pacific take your questions on an online chat November 2

Submitted by Claudia Gabarain on Mon, 2010-11-01 20:48

A couple of weeks ago the Bank released its half-yearly economic assessment of developing countries in the East Asia and Pacific region. The report confirmed the robust recovery of the region's economies overall, but flagged a number of emerging risks, particularly around the return of large capital inflows and appreciating currencies.

The Chief Economist for the region, Vikram Nehru, and the Lead Economist Ivailo Izvorski will be live online in just a few hours, November 2 at 10 a.m. EST (14:00 GMT and 10:00 p.m. Beijing time) to answer your questions on the issues presented in the report. It's always better to submit a question in advance to have a better chance of having it answered, so do send your questions --and/or follow the live chat-- here.

Your questions about East Asia and Pacific's economies, answered by World Bank experts

Submitted by Claudia Gabarain on Wed, 2010-04-14 16:14

Ivailo Izvorski, the Lead Economist for the East Asia & Pacific region of the World Bank (and our latest blogger, below this post), and Vikram Nehru, Chief Economist for the region, held a live online chat a couple of days ago where they answered a good number of questions about China's currency, GDP forecasts, free-trade agreements, and structural reforms, among others. It's a good read that brings the findings of the latest East Asia & Pacific Economic Update closer to the questions many of you have. Take a look at the chat transcript and, if you have any other questions, pose them to Ivailo through his latest blog entry.

Why has developing East Asia led the global economic recovery?

Submitted by Ivailo Izvorski on Tue, 2010-04-06 22:30

Only a few expected in late 2008 that East Asia would lead the world economy out of the crisis. Skeptics pointed to the continued dependence of the region on exports to advanced economies. And skeptics and believers alike were predicting that all countries in the region would rethink their growth models to focus more on domestic demand rather than exports and investment.

What a difference a year and a half makes. East Asia has recovered from the economic and financial crisis, with output, exports and employment mostly at pre-crisis levels. Leading the global economy, real GDP in developing East Asia is set to grow 8.7 percent in 2010, up from 7 percent in 2009, according to the World Bank’s East Asia and Pacific Update report launched today (and of which I’m the lead author, full disclosure here). The projected growth rate for 2010 is almost a percentage point higher than our own forecast made six months ago, and is higher than the 8.5 percent expansion recorded in 2008.

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.