REGIONAL ECONOMIC OUTLOOK
Regional Economic Outlook: Asia and Pacific
November 2008
World Economic and Financial Surveys
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The November 2008 Asia and Pacific REO focuses on the difficult economic environment facing policymakers in the region. Chapter 1 provides an overview of the outlook for the region. With growth slowing, and the global financial crisis increasingly affecting the region, macroeconomic and financial policies will need to be proactive. Chapter 2 looks more closely at inflation in Asia, finding that it is increasingly imported and volatile, which raises important questions about monetary policy frameworks in the future. Chapter 3 takes a longer-term look at how the expected rapid aging of the region may affect capital flows and financial markets in the years to come. |
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Contents
| Definitions | |
| Executive Summary | |
| I. | Overview |
| Implications of the Global Financial Crisis for Asia's Outlook | |
| The Deepening Global Financial Crisis | |
| Key Risks to Asia from the Deepening Global Financial Crisis | |
| 2009 Baseline Forecast: Continued Slowdown in the Face of a Global Financial Shock | |
| Policy Challenges to Safeguard Macro and Financial Stability | |
| Appendix | |
| II. | The Globalization of Asian Inflation |
| Asia's Changing Inflation Landscape | |
| Asia and the Commodities Boom | |
| Policy Considerations | |
| Concluding Remarks | |
| Appendix | |
| III. | The Graying of Asia: Demographics, Capital Flows, and Financial Markets |
| Demographic Trends and Patterns | |
| How Demographics Affect Capital Flows and Financial Markets | |
| Empirical Findings | |
| Potential Policy Implications | |
| Appendix | |
| References | |
| Boxes | |
| 1.1. | The Widening of Basis Spreads in Asia |
| 1.2. | The Impact of High Food and Fuel Prices in Low-Income Asia—Implications for Inflation, Poverty, and Policies |
| 1.3. | Measuring Underlying Inflation Trends |
| 2.1. | Food and Fuel Subsidies in Asia and the World: Are They High, and Have They Affected International Prices? |
| 3.1. | Public Pension Funds in Asia: Maximizing Returns through Investment and Governance Reform |
| Tables | |
| 1.1. | Asia: Official Reserves |
| 1.2. | Asia: Selected Intervention Measures on Deposit Insurance and Debt Guarantees |
| 1.3. | Asia: Real GDP Growth |
| 1.4. | Asia: Headline CPI Inflation |
| 1.5. | Asia: Selected Fiscal Indicators |
| 2.1. | Asia Inflation: Correlation with Inflation in Other Regions |
| 2.2. | Volatility of Inflation |
| 3.1. | Aging and Current Account Positions—Global Panel |
| 3.2. | Demography and Asset Prices and Returns |
| 3.3. | Demography and Financial Structure |
| Figures | |
| 1.1. | Bank CDS Spreads |
| 1.2. | U.S. Corporate Bond Spreads |
| 1.3. | Cross-Currency Basis Swaps with U.S. Dollar |
| 1.4. | Total Assets on U.S. Federal Reserve's Balance Sheet |
| 1.5. | Money Market Spreads |
| 1.6. | Industrial Production |
| 1.7. | MSCI Equity Markets |
| 1.8. | Emerging Market CDS Spreads |
| 1.9. | Asian External Financing: Bond, Equity, and Loan |
| 1.10. | Hong Kong SAR: Stock Market IPO |
| 1.11. | Emerging Asia: Amount of Maturing Corporate Debt, 2008-2018 |
| 1.12. | Current Account Projections versus Change in NEER, 2008 |
| 1.13. | Japan: Number of Corporate Bankruptcies |
| 1.14. | Overseas Lending by Japanese Banks |
| 1.15. | World Real GDP Growth |
| 1.16. | Brent Crude Oil Prices |
| 1.17. | Emerging Asia: Quarterly GDP Growth Forecasts |
| 1.18. | Selected Asia: Export Volume Growth |
| 1.19. | Changes in the Terms of Trade versus Growth in Domestic Demand (2007:Q2-2008:Q2) |
| 1.20. | Emerging Asia: Contributions to GDP Growth |
| 1.21. | Food's Contribution to Inflation versus Its Weight in CPI, August 2008 |
| 1.22. | Asia: GDP Growth |
| 1.23. | Risk Factors |
| 1.24. | CPI Inflation: Inflation-Targeting Countries versus Non-Inflation-Targeting Countries |
| 1A.1 | Financial Developments |
| 1A.2 | Trade Developments |
| 1A.3 | Real Sector Activity |
| 1A.4 | Inflation Developments |
| 1A.5 | Monetary Developments |
| 2.1. | Asia: Consumer Prices |
| 2.2. | Asia: Price Movements |
| 2.3. | Consumer Price Inflation and Contribution from Import and Domestic Prices |
| 2.4. | Oil: OPEC Spare Capacity |
| 2.5. | Expected Brent Crude Oil Price |
| 2.6. | Historical Decomposition of Commodity Price Inflation |
| 2.7. | Annual Change in Consumption of Primary Energy |
| 2.8. | Annual Change in Consumption of Aluminum |
| 2.9. | Asia: Dynamic Correlation between Monetary Policy and Inflation |
| 2.10. | Asia: Difference between Headline and Core Inflation |
| 2.11. | Asia: Worsening Inflation/Output Stabilization Trade-Off |
| 3.1. | Global Demographic Trends |
| 3.2. | Asia's Impending Demographic Transformation |
| 3.3. | Age Structure |
| 3.4. | Asia: Impact of Aging on Current Account Balances |
| 3.5. | Current Account Impact from Relative Changes in Age Cohorts |
| 3.6. | Aggregate Impact of Aging on Current Account |
| 3.7. | Impact of Aging on Current Account Balances Outside Asia |
| 3.8. | Demographics and Asset Prices in the United States |
| 3.9. | Age-Related Pressures on Real Bond Yields |
| 3.10. | Age-Related Pressures on Real Stock Returns |
| 3.11. | Financial Market Structures in Asia, 2005 |
| 3.12. | Age-Related Pressures on Representative Market Structures |