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Development Outlook in East Asia and Pacific
Presentation at the Timor Leste & Development Partners Meeting
June 19, 2013Bert Hofman, World Bank Group
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THE SHORT RUN
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Quarterly GDP growth, annualized
Source: World Bank.
Global growth is picking up
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East Asia and Pacific Continues to Outpace Others
4
Annual GDP growth, %
Source: World Bank, Global Economic Prospects 2013B.
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Short Term Risks
Old Ones are Fading•Eurozone•Fiscal CliffNew Ones Emerging•Strong capital flows and asset bubbles•Impact of Abenomics•Quantitative Easing Phase Out•China slowdown and Commodity Prices
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Capital flows to developing countries have rebounded
6
Gross international capital flows to developing countries, billions USD
Source: World Bank, Dealogic.
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Industrial commodity prices are easing due to new supply
7
USD price indexes, January 2005=100
Source: World Bank Global Economic Prospects 2013.
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Global commodity supply is responding to resource investments
Billions USD
Source: World Bank, Bloomberg.
Billions USD
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Will shale gas come to Asia?United States Energy Prices 2000-2012
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THE LONG RUN
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A Changing WorldDeveloping countries share of global GDP (PPP,
Constant 2005 International $)Developing countries’ contribution to global GDP
growth (PPP, Constant 2005 International $)
(Source: WB, World Development Indicators)
World Growth
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East Asia and Pacific most rapidly urbanizing
Source: World Urbanization prospects, 2009 revision. United Nations Population Division 2010.
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200000 150000 100000 50000 0 50000 100000 150000 200000
Getting older….
Mln. people
Age categories
Source: United Nations Population Division 2010.
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Only Timor Leste Not Aging for a Long Time to Come
TLS
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Increasingly Middle Income
Source: WDI
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And Middle Class
Source: Bussolo and Murard (2011).
Projections of people living on $10-$50 per day 2005-2030
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Still lots of poor
Source: World Development IndicatorsNote: Absolute poverty is $1.25 per day
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Far to grow
Source: WDI
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Structural Change key for Rapid Rise in Labor Productivity
productivity growth 1999-2008
Source: World Bank: At Work in East Asia and Pacific, forthcoming 2013
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Countries are increasingly tied into supply chains
Source: IMF ((2011) China Spillover Report, as Adapted from Koopman et al. (2010), "Give Credit Where Credit is Due: Tracing Value Added in Global Production Chains," NBER WP 16426 Note: DVA refers to Domestic Value Added, while FVA refers to intermediate Foreign Value Added.
Value Added in China’s Export Supply Chain (2004)
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The Challenge of Distance
FijiVanuatu
Tuvalu
Tonga
Kiribati
Solomon Islands
Marshall Islands
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Few middle income economies became rich, but many of those are in EAP
(Per capita income relative to the United States, 1960 and 2008)
Source: World Bank and Development Research Center 2012, China 2030
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China Rising, and Changing
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THE CHALLENGE OF SOCIAL COHESION
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Poverty has fallen dramatically(Poverty headcount at $2/day)
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The pace of poverty reduction is slowingReduction in number of people living on less than US$2 a day, in millions
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Inequality on the rise
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High Share of Vulnerable EmploymentOwn account and unpaid family workers as a share of the labor force, 2010
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Youth unemployment high in some places, notably the Pacific
Source: World Bank: At Work in East Asia and Pacific, forthcoming 2013
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Underutilized Women in Some Places
TLS
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Growth has created jobs, although less in EAP than in some other regions
Long-term employment elasticity to GDP growth
Source: Crivelli, E., D. Furceri and J.Toujas-Bernate (2012)
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Small and Medium Enterprises Create most jobs
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New Businesses Create Lots of JobsEmployment Creation 2006-10 by age of the firm as share of total employment change
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Not always easy doing business
Source: World Bank Doing Business Report
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Summing Up
• East Asia and Pacific is likely to grow rapidly for a considerable time to come
• It is likely to become a rapidly growing market for final consumption
• Demographics and a rising China offers opportunities for young countries
• Connectivity, business environment and human capital key to success in a changing world