palani -ktm presentation on gfc-april-2010
TRANSCRIPT
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ASIA LEADS GLOBALRECOVERY:
MORE FUNDAMENTAL RETHINK NEEDED
FOR ASIAN CENTURY
Thangavel PalanivelChief, Regional Strategy and
Policy Unit,
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Volatility in Commodity Prices affected
Asia in different ways
During the last five years, food andfuel prices increased rapidly
Since Sep 2008 due to GFC, prices
declined substantially, but they still
high compared to early 2007.
Unlike other developing regions,
decline in commodity prices
generally helped Asia (except for
some such as Mongolia, and PNG),
which allowed it to respond GFC
in a effective manner
Prices started to rise in recent
months; strong global recovery
could push up prices once again
which could have serious social
implications
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F o o d a n d F u e l P ri ce s d e cb u t i nc re a s ing on c e
IM F C ru d e O-P ric
F A O F o o d
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200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 2009
2010 P 2011P
G r o w t h ra t e s o f r e a l G D P h a v e b e e n m o r e s y n c h r o n is e d t
Wor ld
Adv anc ed c oun t r
Deve lop ing count r ie
and emer g ing ma r k
A f r i c a
Centra l and Eas te
Eu r ope
Deve lop ing A
La t in Am er ic a a
Car ibbean
S o u r c e : I M F W E O , A p ril 2 0 1 0
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Economic recovery is stronger than anticipated,
but is proceeding at different speeds in different
regions
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Q u a r t e r ly R e a l G D P G r o w t h ( %
C H IN
H O N G K
IN D I
IN D O N E
KO R E A ,
M A LA Y
P H ILI P P I
SI N G A P
T A IW
T H A IL A
2008 2009 2010 2011
World output 3.0 -0.6 4.2 4.3
Advanced
economies 0.5 -3.2 2.3 2.4
United States 0.4 -2.4 3.1 2.6
Euro area 0.6 -4.1 1.0 1.5
Japan -1.2 -5.2 1.9 2.0NIE-Asia 1.7 -0.9 5.2 4.9
Emerging
economies 6.1 2.4 6.3 6.5
Developing Asia 7.9 6.6 8.7 8.7
China 9.6 8.7 10.0 9.9
India 7.3 5.7 8.8 8.4
ASEAN-53
4.7 1.3 4.7 5.3
World trade
volume 2.8 -10.7 7.0 6.1
World Economic Outlook
Source: IM F WEO, April 2010
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V-Shape Recovery in Exports and Imports
60
80
100
120
140
160
180
2007_Jan2007_Mar 2007_May2007_Jul 2007_Sep 2007_Nov 2008_Jan2008_Mar 2008_May
2008_Jul 2008_Sep 2008_Nov 2009_Jan2009_Mar 2009_May2009_Jul 2009_Sep 2009_Nov 2010_Jan
Jan2007=100
Exports Collapsed in Asia Since Sep 2008, but recovering slowly
CHINA
HONG KONG
INDIA
INDONESIA
KOREA, REP
MALAYSIA
PAKISTAN
PHILIPPINES
SINGAPORE
TAIWAN
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0
100
200
300
400
500
2005_Jan2005_Mar 2005_May
2005_Jul_ep 2005_Nov
2006_Jan2006_Mar _ay
2006_Jul2006_Sep 2006_Nov
2007_Jan2007_Mar 2007_May
2007_Jul_ep 2007_Nov
2008_Jan2008_Mar 2008_May
2008_Jul2008_Sep 2008_Nov
2009_Jan2009_Mar 2009_May
2009_Jul_ep 2009_Nov
2010_Jan
Jan2005=100
Equity markets collapsed in 2008, but rec
CHINA
HONG KON
INDIA
INDONESI
KOREA, REP.
M ALA YSI
PAKISTA
PHILIPPIN
SINGAPO
TAIW A
THAILAN
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C h a r t 1 a : G D P G r o w t h , S a v i n g s a n d I n v e s tm e n
Sa vi ng In ve st me G DP G ro w
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C h a rt 1 b : G D P G r o w th , S a v in g s a n d I nv e st m I
Sa vin g I nv e st m G D P G r o
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C h a r t 1 c : G D P G r o w th , S a v in g s a i l i
S a v i n I n v e s t G D P G r
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C h a r t 1 d : G D P G r o w t h , S a v i n g s a n d I
S a v i n I n v e s t m G D P G r
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C h a r t 1 e : G D P G r o w t h , S a v i n g s a n d I n v
S a v i n I n v e s t m G D P G r
After the Asian Financial Crisis, savings rates increased,
but investment rates plummeted in South Korea,
Indonesia, Malaysia, Thailand and the Philippines
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Exchange rates in Asia have depreciated quite
significantly in 2008 and early 2009, but now
appreciating due to capital inflows
80
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2007_Jan 2007_Mar 2007_May 2007_Jul 2007_Se p 2007_Nov 2008_Jan 2008_Mar 2008_May 2008_Jul 2008_Se p 2008_Nov 2009_Jan 2009_Mar 2009_May 2009_Jul 2009_Se p 2009_Nov 2010_Jan 2010_Mar
Index of nominal exchange rates (to U
CAMBODIA
CHINA
INDIA
INDONESIA
KOREA, REP
MALAYSIA
PAKISTAN
PHILIPPINES
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The Social Impacts of the Global
Economic Crisis
The assessment of social impacts of the economic
crisis has been constrained by lack of recent data on
social indicators
Hence UNDP used multiple approaches Extrapolating social impacts based on the past
experience
Rapid impact surveys on the vulnerablesectors/population
Projecting social indicators by using growth elasticity
or CGE modeling
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Past Economic Crises and Poverty Reduction
In all previous economic crises, poverty rates have been
increased by an average of 2-3 percentage points
In many countries (Indonesia, Korea, Argentina and
Venezuela), poverty rate in the post crisis period
remained high compared to pre-crisis period
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Pre
-1996
Crisis
-1998
Post
-2004
Pre
-1997
Crisis
-1998
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-1983
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Post
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Crisis
-1994
Post
-1996
Indonesia Korea MalaysiaThailandArgentinaArgentinaArgentina Brazil Costa RicaVenezuelaVenezuelaVenezuela
Past Economic Crises and Poverty Rate
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Rich countries Positive impact in United States
Middle-income countries Ambiguous impact
Examples of positive impact:Brazil, Mexico, Nicaragua, Peru,
Examples of negative impact: CostaRica
Poor countries Negative impact: Cote dIvoire,Indonesia, Malawi,
Source: A Ferreira and Schady (2008, p.50).
Impact of Past Crises on Education
1. Impact varies depending upon level of economic
development
2. Positive impact seen in HICs and MICs, while negative
impact in LICs
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Rich countries Positive impact - United States
Middle-incomecountries
Ambiguous impact
Examples of positive impact: Colombia
Examples of negative impact: Peru ,Mexico, Russia
Poor countries Negative impact - Nicaragua, India, CotedIvoire, Zimbabwe, Ethiopia, Tanzania,Cameroon
Source: Ferreira and Schady (2008, p.50).
Impact of Past Crises on Child Health
and NutritionImpact varies depending upon level of economic development
Positive impact seen in HICs while negative impact in LICs and MICs
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Sample size - 1129 workers covering gems & jewelry,
engineering auto parts, textiles, garments, agriculture in five
states (Gujarat, Madhya Pradesh, Tamil Nadu, Punjab, Uttar
Pradesh)
The gems and jewelry industry was among the worst affected
sectors- 30 % of the workers were unemployed, 49 % of
workers had shifted to similar work with lower income and 21
% had shifted to other less paying activities.
Rapid Impact Surveys on the Vulnerable
Sectors Indian case study
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Rapid Impact Surveys on the Vulnerable
Sectors Indian case study
A high proportion (82%) of workers also experienced a decline
in their wages.
The average monthly income of workers declined by 37%.
86% of workers have reported that their households reduced
food consumption; 58 and 44 % of workers have reduced
expenditure on health and education respectively
Dis-savings was an important coping strategy; 32 % of HHs
used their past savings; While 14 % of HHs pawned , 15% of
HHs sold some of their assets to meet their immediate needs.
A high proportion of HHs also resorted to borrowing as a
coping strategy
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Employment Effects of the Current Crisis
Millions of People Become Unemployed or
Part of Working Poor
Though economic activity has been rebounding strongly, labour
markets showed little sign of improvement.
Preliminary estimates (ILO, Jan 2010) show that number of the
unemployed people increased by 34 million in the last 2 years in
the world
In Asia, number of the unemployed people is estimated to
increased to 87 million in 2009 from 78 million in 2007.
Underemployment is also serious problem; though Asia accountsfor 57% of global employment creation in 2008, significant
proportion of these new jobs are not remunerative;
consequently, 47% of the employed in South Asia are working
poor compared to global average of 20%.
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Gender Impact of the Current Crisis
Varies from Sectors to Sectors
Women workers have been affected much more
seriously than male workers in the garments,
textiles, toys, and electronics sectors because they
dominate workforce at a ratio of 2-5 female workersfor every male worker.
However, male workers have also been affectedseriously in the construction and automobiles
sectors.
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Migrant workers less affected than
predicted and remittances showed
resilience Unlike in the past crises, nomassive international
deportation in 2009.
Some countries have
introduced restrictions on new
migrants; consequently, a
significant slow down in
migrant outflows in 2009
Remittance flows have shownresilience in Asia and Pacific
compared to LAC and MENA
regions
Source: IMF Statistics 2010
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Tourism Initially Affected, but Recovered
Quickly
In the first half of 2009,
most of the Asia-Pacific
countries posted declines in
visitor numbers
However, in the second half
of 2009, tourist arrivals
rebounded strongly
Consequently, the impact ofthe global financial crisis on
tourism related sectors
seems to be modest.
Q1 Nov Dec
Asia Pacific -7.3 3.0 5.7
China -4.8 -2.0 -5.4
India -13.5 -1.0 21.0
Malaysia 2.2 11.0 4.0Maldives -10.8 7.0
Nepal -16.7 8.0 4.4
Republic of Korea 24.3 11.0 4.0
Singapore -5.6 8.0
Sri Lanka -21.3 20.0 16.2
Taiwan 2.2 25.0 27.8
Thailand -15.7 26.0 40.8
Vietnam -14.1 37.0 5.1
Source: W orld Tourism Organization (UNW TO), January 20
Percentage change in Tourist Arrivals, y-o-y
basis, 2009
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High food price reduces purchasing powerof the urban poor more severely than the rich
Higher cereals prices during 2006-08 has decreased poor
households purchasing power by 24 % in Asia, while the
same has decreased only by 4 % for rich households.
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100 Million People Pushed Into Poverty
in Asia
Poverty incidence (1.25$US a day) has declined sharply in Asia.
However, the region still has over 900 million people living under
extreme poverty conditions
Since 1996, Asia was able to lift some 300 million people out of
extreme poverty, but they are under huge threat from multipleglobal crises
Food and fuel crisis during 2007-08 forced 60 million people into
extreme poverty; food and fuel crises are not over; prices are still
high
On the basis of the most recent data on economic growth, it is
estimated that the global financial crisis could trap an additional
17 million people on extreme poverty in 2009, and 21 million in
2010
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100 Million People Pushed Into Hunger
in Asia
Unlike rapid reduction in the income poverty target, progress
toward the MDG hunger target in A-P Region had been only
modest declined from 20 % in 1990-92 to 16 % in 2003-05.
A moderate reduction also seen in the number of hungrypeople from 582 million to 542 million for the same period.
FAOs estimates show that even this modest progress has
been reversed after the food, fuel and financial crises.
Globally, 3F crises pushed undernourished people beyond
one billion mark from about 850 million in 2007. Largest
increases seem to be in Asia (about 100 million)
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Policy Responses in the Right Direction
There are signs that developing Asia, or at least somecountries in the region, are likely to emerge from the crisis
faster.
To a significant extent, the recovery has been associated
with quick and proactive countercyclical monetary and
fiscal policies
Support for poor and vulnerable has also been stepped up
but remains piecemeal and fragmented But these are short-term measures: more fundamental re-
structuring needed
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Crisis an Opportunity to Reset Asia Towards
More Inclusive and Greener Growth
Asian growth increasingly become more urban centered. Growth elasticity of employment and poverty in Asia is not only low, but
also declined in the last decade compared to 1980s
Consequently inequality increasing; Experiences show that if economic
growth is to be favourable to the poor, then direct resources to the sectors
in which the poor work (agriculture), areas in which they live (relativelybackward regions), factors of production which they possess (unskilled
labour) and outputs which they consume (such as food)
Shifting from carbon-based (coal and oil) growth to solar, nuclear andrenewable energy could also help the poor, as they have been affected
severely by global warming related natural disasters recently
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Coverage of Social Protection is low (%)
compared to LAC and CE0 20 40 60 80 100Bangladesh
Bhutan
Cambodia
China
Fiji
India
Indonesia
Lao PDR
MalaysiaMaldives
Mongolia
Nepal
Pakistan
Philippines
PNG
Sri Lanka
Viet Nam
Unem/under employe
Elderly
Health Care
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Crisis also an Opportunity to Strengthen Asias
Social Safety Nets/Protection Programmes
Current programmes are largely via product
subsidies (fuel, food) and are not well targeted
Very limited use of conditional cash transfers (only in
Bangladesh, Cambodia, Indonesia, Philippines)
Food-for-work and employment guarantee schemes,
e.g. NREGA in India
Thailands 30 Baht Scheme and Chinas new health
insurance moves in right direction
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A Seven-Point Agenda To Reset For
An Asian Century:
Rebalance Asian Growth: From Export-led to Domestic
Shift to More Inclusive and Cleaner Development
Consolidate and Target Better Social Assistance Programmes
Strengthen Social Insurance Programmes Pensions, Health,Unemployment
Improved Financial Sector Deepen Bond, Insurance, Mortgage
Markets
Expand Asian Monetary & Financial Coordination BiggerAsian Monetary Facility
Establish Legal and Infrastructure for Asian Common Market
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Great Leadership Is Vital To Achieve Asian Century
Asia must lead not wait and follow
Asian leaders must come together and lead the way
Asia has intellectual and physical resources: can it master
political will
Thank you.
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