Weathering Growing Risks

Kiatipong Ariyapruchya
Senior Country Economist
The World Bank Group
 Key Messages

• Regional growth slowed in the first half of 2019 amid weakening

global demand and heightened trade policy uncertainty

• Export growth declined sharply in the region, followed by a fall in

investment growth in many of the region’s large economies

• Growth in developing East Asian and Pacific economies is

projected to decelerate in the near term

• Downside risks to the region’s growth prospects have intensified

• Active policy measures will be needed to manage these risks

Global growth has moderated, weakening global demand

A. Global economic growth B. Global manufacturing activity

Percent World Percent, 3m-on-3m saar Index, 50+=expansion

Advanced economies 12 54
Emerging and developing economies
8 9
6 52
6
3
4 0 50

2 -3 Goods trade
-6 New export orders (RHS) 48
0
Jan-16

Jan-17

Jan-18

Jan-19

Jun-19
Jul-16

Jul-17

Jul-18
2019f
2013
2014

2018
2010
2011
2012

2015
2016
2017

Source: Haver Analytics, World Bank

Source: Haver Analytics, World Bank
Note: (SA, 50+=Expansion). Data are 3-month moving averages.
 Growth in the region’s large economies has also slowed

GDP growth
(year-on-year percent change)
Percent Percent
Developing EAP
China Indonesia
China
Malaysia Philippines
7 Developing EAP (excluding China) 10
Thailand Vietnam
8
6
6

5 4
2
4
0
Q4-2018
Q1-2018

Q2-2018

Q3-2018

Q1-2019

Q2-2019
2017

Q2-2017
Q1-2017

Q3-2017
Q4-2017
Q1-2018
Q2-2018
Q3-2018
Q4-2018
Q1-2019
Q2-2019
Source: Haver Analytics; World Development Indicators.
 Export growth has deteriorated sharply in the region

Panel A. Exports of Developing East Asia Panel B. Exports to the World excluding
to partner countries developing East Asia

Percent United States Percent Percent China Indonesia

World (excl. Dev EA) Malaysia Philippines
Euro Area 30 Thailand Vietnam
15 China (rhs) 40
Developing East Asia 25

30 20
10 15
20 10
5 5
10
0
0 0 -5
ธ.ค.-18
ต.ค.-18
ก.ค.-18
ส.ค.-18
ก.ย.-18
มิ.ย.-18
ม.ค.-18
ก.พ.-18
มี.ค.-18
เม.ย.-18
พ.ค.-18

พ.ย.-18
ม.ค.-19
ก.พ.-19
มี.ค.-19
เม.ย.-19
พ.ค.-19
มิ.ย.-19

ต.ค.-18
ธ.ค.-18
ส.ค.-18
พ.ค.-18
ก.ค.-18
ก.ย.-18
พ.ย.-18

พ.ค.-19
ม.ค.-18
ก.พ.-18
มี.ค.-18
เม.ย.-18
มิ.ย.-18

ม.ค.-19
ก.พ.-19
มี.ค.-19
เม.ย.-19
มิ.ย.-19
Sources: IMF Direction of Trade Statistics; Haver Analytics; World Bank Staff calculations.
Note: Export value growth (12-month moving average, year-on year percent change). Developing East Asia include Cambodia, China, Indonesia, Lao PDR,
Malaysia, Mongolia, Philippines, Thailand, and Vietnam.
 Weaker trade and increased trade policy uncertainty has
weighed on investment growth

Panel A. Trade uncertainty index Panel B. Investment growth

World trade uncertainty index Percent
16
6
5 12

4 8
3 4
2 0
1
-4

2018H1
2018H2
2019H1

2018H1
2018H2
2019H1

2018H1
2018H2
2019H1

2018H1
2018H2
2019H1
2017

2017

2017

2017
0
2015q3
2013q1
2013q3
2014q1
2014q3
2015q1

2016q1
2016q3
2017q1
2017q3
2018q1
2018q3
2019q1
2019q3

Indonesia Malaysia Thailand Philippines

Sources: Ahir, Bloom and Furceri, “The World Uncertainty Index”. Haver Analytics
Note: Panel A. The index of trade uncertainty is constructed using frequency counts of "uncertainty" (and its variants) in the quarterly Economist Intelligence Unit
(EIU) country reports for 143 countries.
The region’s growth slowdown is expected to continue

East Asia-Pacific Economic Outlook

Actual Forecast
2017 2018 2019 2020
Developing EAP 6.5 6.3 5.8 5.7
China 6.8 6.6 6.1 5.9
Developing EAP excl. China 5.3 5.2 4.9 4.9
Indonesia 5.1 5.2 5.0 5.1
Malaysia 5.7 4.7 4.6 4.6
Philippines 6.7 6.2 5.8 6.1
Thailand 3.9 4.1 2.7 2.9
Vietnam 6.8 7.1 6.6 6.5
Cambodia 7.0 7.5 7.0 6.8
Lao PDR 6.9 6.3 6.5 6.7
Myanmar 6.8 6.5 6.6 6.7
Mongolia 5.4 6.8 6.9 6.3
Source: World Bank data and staff estimates.
Risks to the region’s growth prospects have intensified

• Protracted trade tensions between the China and the

United States

• Faster-than-expected slowdowns in China, the Euro Area

and the United States, as well as a disorderly Brexit

• An abrupt change in global financial conditions

• High and rising debt levels in some countries

 Policy approaches to manage growing risks

• Where policy space is available, use policy to support economic growth

– Improve the quality of spending and guard fiscal sustainability

– Develop sound debt management strategies to manage risk exposure from

countries’ debt portfolios

• Stay the course on trade openness, including through deeper regional

integration

• Enact structural reforms to raise productivity, enhance trade and

investment, and encourage innovation
 Key Messages

• Regional growth slowed in the first half of 2019 amid weakening

global demand and heightened trade policy uncertainty

• Export growth declined sharply in the region, followed by a fall in

investment growth in many of the region’s large economies

• Growth in developing East Asian and Pacific economies is

projected to decelerate in the near term

• Downside risks to the region’s growth prospects have intensified

• Active policy measures will be needed to manage these risks

 Growth incidence by country
10.0%

8.0%

6.0%
Annualized Growth (%)

4.0%

2.0%

0.0%

-2.0%

-4.0%

-6.0%

-8.0%
Mongolia Mongolia Philippines Philippines Thailand Thailand Vietnam Vietnam
2010-12 2014-16 2009-12 2012-15 2008-13 2015-17 2010-2014 2014-16