integrated but uncoordinated: real economies in asia in the era of financial liberalisation jayati...
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Integrated but uncoordinated:Real economies in Asia in the era of
financial liberalisationJayati Ghosh
IDEAs Conference
Muttukadu January 2015
Savings and investment rates and GDP growth
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
30.00
35.00
40.00
45.00
50.00
55.00
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
14.0
15.0
China
Investment rateSavings rateGDP growth rate (right axis)
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
15.00
20.00
25.00
30.00
35.00
40.00
0.0
2.0
4.0
6.0
8.0
10.0
12.0
India
Investment rateSavings rateGDP growth rate (right axis)
Savings and investment rates and GDP growth
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
22.00
24.00
26.00
28.00
30.00
32.00
34.00
36.00
38.00
-10.0
-5.0
0.0
5.0
10.0
15.0
South Korea
Investment rateSavings rateGDP growth rate (right axis)
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
15.00
20.00
25.00
30.00
35.00
40.00
45.00
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
Thailand
Investment rateSavings rateGDP growth rate (right axis)
Savings and investment rates and GDP growth
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
10.00
15.00
20.00
25.00
30.00
35.00
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Indonesia
Investment rateSavings rateGDP growth rate (right axis)
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
-10.0
-5.0
0.0
5.0
10.0
15.0
Malaysia
Investment rateSavings rateGDP growth rate (right axis)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
Domestic credit to private sector(% of GDP)
ChinaIndiaIndonesiaMalaysiaSouth KoreaThailand
Financial indicators and investment rates% of GDP
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
China
Domestic credit to private sector
Stock market capitalisation
Investment rate
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
India
Domestic credit to private sector
Investment rate
Stock market capitalisation
Financial indicators and investment rates% of GDP
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
South Korea
Domestic credit to private sector
Stock market capitalisation
Investment rate
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
Thailand
Domestic credit to private sector
Stock market capitalisation
Investment rate
Financial indicators and investment rates% of GDP
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
0
10
20
30
40
50
60
70
Indonesia
Domestic credit to private sector
Stock market capitalisation
Investment rate
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
Malaysia
Domestic credit to private sector
Stock market capitalisation
Investment rate
Malaysian financial system in 2011 Number Total assets
(MYR bn) % of total financial system assets
% of GDP
Total banks 54 1782 50.6 202 Domestic commercial banks 6 1034 29.4 117 Foreign commercial banks 17 353 10 40 Domestic Islamic banks 10 284 8.1 32 Foreign Islamic banks 6 43 1.2 5 Investment banks 15 62 1.9 8 Development finance institutions
13 205 5.8 23
Labuan IBFC 517 256 7.2 29 Insurance companies 53 198 5.6 22 Pensions and provident funds 3 563 16 64 Fund management 82 424 12 48 Other NBFCs 9101 100 2.8 11 Total financial system assets 3524 100 400
Composition of bank lending in Malaysia,2011
Composition of bank loans in Malaysia
Lending to households in Malaysia
Indonesia Financial system assets
Indonesia distribution of loans
Housing Vehicles Others0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Indonesia - Non-industrial loans as % of total loans
20102011201220132014
2002 2007 20120
10
20
30
40
50
60
70
0
50
100
150
200
250
300
350
63.8 63.2
48.2
11.9 11.814.3
24.3 25
37.5
212
253
312
South Korea Financial system(% of total financial assets)
Banks Non Bank Depository InstitutionsOther financial institutions Finance as % of GDP
South Korea Household debt(Currently more than 156% of HH disposable income)
Lessons Financial deepening does not have a positive effect on
investment and real economic growth, but can generate savings “surpluses” that are then exported.
Domestic growth is increasingly sustained by consumer credit that fuels housing and real estate booms.
This is obviously unsustainable and indeed the downturn has already begun.
Unravelling of household debt has knock-on effect on bank viability and on investment.
Downward pressure on economic activity cannot be countered by further financial deregulation, but attempts at tightening regulation add to the pressure.
Absence of co-ordination across countries further complicates the problems because of cross-border capital flows.