In my 10 years of working in the World Bank, I have seen remarkable changes around me. In 2004, Emerald Avenue in Ortigas Center, where the old World Bank office was located, started to wind down after 9 PM. Finding a place to buy a midnight snack whenever I did overtime was hard. It was also hard to find a taxi after work.
Today, even at 3 AM, the street is bustling with 24-hour restaurants, coffee shops, and convenience stores, hundreds of BPO (Business Process Outsourcing) employees taking their break, and a line of taxis waiting to bring these new middle class earners home. Living in Ortigas Center today means that I also benefit from these changes.
Macroeconomists for the Poor
The latest macroeconomic data released by China’s National Bureau of Statistics (NBS) on April 18 suggest that China’s economic growth has moderated in the first quarter of 2014. GDP growth has decelerated from 7.7 percent (year-over-year) in the last quarter of 2013 to 7.4 percent (year-over-year) in the first quarter of 2014.
On a sequential basis, the quarter-on-quarter seasonally adjusted growth slowed from 1.7 percent in Q4 last year to 1.4 percent in Q1 2014.
The deceleration in the first quarter of this year is in line with World Bank expectations (see our latest East Asia Economic Update) (Figure1).
Figure 1: Official growth data on the demand side reflect subdued export growth and a moderation in investment growth. Consumption led growth in the first quarter of 2014, contributing 5.7 percentage points to growth, followed by investment, contributing 3.1 percentage points. Net exports dragged down growth by 1.4 percentage points.
Many economists speculate that the weakening trend in growth may put more pressure on the government to implement more and stronger growth supportive fiscal and monetary policies, following the stimulus measures unveiled recently that include accelerated expenditures on railway construction and social housing, as well as tax breaks for small businesses.
Can Indonesia’s economy move from a situation of investment in flux to an investment influx? This is one of the questions posed by the World Bank’s March 2014 edition of the Indonesia Economic Quarterly.
Why is Indonesia’s investment growth in flux? First, there has been a slowdown in fixed investment, due to lower terms of trade and tighter external financing conditions. This has helped narrow Indonesia’s external imbalances.
Second, while foreign direct investment—an important source of investment financing—has remained solid so far, the rapid growth of FDI inflows seen in recent years shows signs of plateauing.
Third, Indonesia remains reliant on external financing from portfolio investment inflows. These have surged in recent months, but they can be volatile.
Finally, recent policy developments have increased regulatory uncertainties. Add to that the usual difficulty of predicting policy ahead of elections, which may impact on investment of all kinds.
Given uncertain prospects for global investment flows to major emerging market economies like Indonesia, the good news is that Indonesia’s external balances are adjusting. The current account deficit shrank significantly in the fourth quarter of 2013, to $4.0 billion, or 2% of GDP. This is a welcome reduction from the record high of $10.0 billion in the second quarter of 2013—that’s 4.4% of GDP. The stock market rallied, gaining 9% in local currency terms, bond yields fell, and the Rupiah climbed back by 7% against the USD, year-to-date, recouping some of last year’s significant losses. Banking and portfolio inflows also rose in the final quarter of 2013*.
But some caution is warranted. The adjustment has been narrowly based on tighter monetary policy and currency depreciation over the second half of 2013, and slower investment growth. Indonesia remains vulnerable to a renewed deterioration of global market conditions.
2013 has been a year of adjustment for Indonesia’s economy. In the recent edition of the Indonesia Economic Quarterly report, the flagship publication of the World Bank Indonesia office, we asked the questions: what are the drivers of this adjustment and how should policy respond?
|By 2016, around 12.4 million Filipinos would be unemployed, underemployed, or would have to work or create work for themselves in the low pay informal sector by selling goods like many seen here in Quiapo, Manila.|
The Philippines faces an enormous jobs challenge. Good jobs—meaning jobs that raise real wages or bring people out of poverty—needed to be provided to 3 million unemployed and 7 million underemployed Filipinos—that is those who do not get enough pay and are looking for more work—as of 2012.
In addition, good jobs need to be provided to around 1.15 million Filipinos who will enter the labor force every year from 2013 to 2016. That is a total of 14.6 million jobs that need to be created through 2016.
Did you know that every year in the last decade, only 1 out of every 4 new jobseeker gets a good job? Of the 500,000 college graduates every year, roughly half or only 240,000 are absorbed in the formal sector such as business process outsourcing (BPO) industry (52,000), manufacturing (20,000), and other industries such as finance and real estate.
The rapidly rising economic weight of developing countries – now in its third decade, rather than a product of the crisis, is notable for several interrelated developments:
• Developing economies as a whole have been growing faster than advanced economies since the 1970s, on both aggregate and per capita terms. (Read more about growth poles - .pdf)
• The margin between these growth rates has risen of late, although growth paths have become more synchronized. Decoupled in trend terms, more coupled in cyclical terms? (There is an abundant discussion of “decoupling”: see one example here and one here)