Full Report - Subregional Office for East and North-East Asia - escap

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ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2013 steadily over the year, with contractions recorded in the second half of 2012. Exports of goods and services account for more than 200% of Singapore’s GDP so the economy is more vulnerable to external demand shocks than its neighbours. As a result, weakness in the export-oriented sectors fed quickly into the rest of the economy. Private consumption growth virtually paused in the third quarter of 2012. This was also partly underpinned by a sluggish real wage growth due to high inflation. The economy of Thailand exhibited a robust postflood recovery in 2012, with output growth rebounding to 6.4% on reconstruction and revived business activities. The severe floods had pushed growth down to only 0.1% in 2011. There was a quick turnaround of production in domestic-oriented sectors, such as food and construction materials, but as production capacity started to pick up in the middle of 2012, the global environment sharply deteriorated and exports dipped. Thus growth in 2012 was supported mainly by domestic demand, especially private consumption. In addition to favourable employment conditions, consumer spending benefited from government schemes, such as tax relief for first-car purchases, higher minimum wage levels in key economic areas and higher salaries for civil servants with university degrees. The return of overseas tourists also contributed to the growth outcome. Replacement of damaged production facilities helped to boost fixed investment although weak export orders held back investment growth somewhat. Under the Timor-Leste Strategic Development Plan, the Government is rapidly scaling up social spending and capital investment In Timor-Leste, economic growth remained high at about 10% in 2012, virtually on par with the rate of 10.6% in 2011, fuelled by strong petroleum revenues and increased government expenditures. Cash transfers and infrastructure spending on national electrification and road upgrades boosted domestic demand. Under the Timor-Leste Strategic Development Plan, 9 the Government is rapidly scaling up social spending and capital investment, with a view to develop the non-oil economy, create jobs and reduce poverty. Despite significant efforts, persistant poverty and large development gaps remain, and there is currently no domestic production base except subsistence farming and coffee, leaving the country heavily dependent on imports. Viet Nam’s economic growth rate decelerated further to 5% in 2012, following rates of 5.9% in 2011 and 6.8% in 2010. Weak growth was partly cyclical, resulting from the need to stabilize the economy and curb inflation, but also partly structural, as side effects of heavy investment-driven growth became more visible in State enterprises and the banking sector. Industrial activity was particularly weak at the beginning of the year, but improved as the year progressed. A bright spot in the economy was the buoyant services sector, which continued to expand at a rapid rate, with tourism, hotels and restaurants growing more than 20% faster than in 2011. Continued strong agricultural production also contributed to growth. Although facing significant challenges in stabilizing the economy and restructuring the financial sector, the country possesses a dynamic workforce and a relatively diversified economy. Inflation softens as pressure from food and fuel prices subsides Inflation rates across the subregion softened in 2012 (see figure 2.14). In particular, food and fuel inflation moderated, although still outpacing headline inflation in most countries. This helped in lowering inflation in Indonesia and the Philippines where, despite strong domestic demand, average inflation rates were comfortably within the central banks’ target ranges. In the case of the Philippines, food prices trended upward in mid-2012 after a series of typhoons and monsoon rain that led to some supply disruptions, but downward adjustments to fuel prices held back transport inflation. In Thailand, consumer inflation moderated in 2012 as food inflation, which reached nearly 8% in 2011 as a result of flood damage, softened as agricultural production regained its former position. Similarly, Cambodia and the Lao 122
MACROECONOMIC PERFORMANCE AND POLICY CHALLENGES AT THE SUBREGIONAL LEVEL CHAPTER 2 Figure 2.14. Inflation in South-East Asian economies, 2010-2012 20 18 16 14 12 10 8 6 4 2 0 Brunei Darussalam Cambodia Indonesia Lao People's Democratic Republic Malaysia Myanmar Percentage Philippines Singapore Thailand Timor-Leste Viet Nam Sources: ESCAP, based on national sources; and CEIC Data Company Limited. Available from http://ceicdata.com (accessed on 30 March 2013). Note: Data for 2012 are estimates. 2009 2010 2011 People’s Democratic Republic benefited from lower food and fuel inflation. In addition, labour market and wage policies could affect inflation. In Thailand, inflation expectations could rise as the application of higher minimum wages is extended to all provinces in 2013. In Malaysia, the nationwide introduction of minimum wages in January 2013, and in July for smaller business enterprises, could add to price pressures. However, given the moderate core inflation in these countries, the concern has been more on the impact on employment rather than prices. In Singapore, where inflation remains above-trend, the Government’s efforts to enhance productivity through tightening the inflow of foreign labour could elevate labour costs, at least temporarily, and thus core inflation. In the Lao People’s Democratic Republic, it is expected that inflation will edge up in 2013 due to an across-the-board increase in public sector wages. Another factor affecting inflation could be changed in administrated prices and taxes. In Malaysia, a government effort to rationalize fuel price subsidies continued in 2012, with the price of premium petrol having been adjusted upwards by about 11% in September. However, the inflation impact has been quite modest. The introduction of a goods and services tax could push up inflation expectations. In Indonesia, the price prospect is highly sensitive to possible changes in administrative prices; for instance, in the budget for 2013 a 15% increase in electricity prices has been proposed. Inflation can also be induced by excessive liquidity and high government spending. Inflation in Viet Nam declined significantly from 18.7% in 2011 to 9.3% in 2012, under the Government’s effort to stabilize the economy from the side effects of earlier expansionary policies. However, inflation still remained high in health services, education and transport, leaving average households exposed to large price increases. In Singapore, price pressures have generally been fuelled by low global interest rates that drove up domestic property prices. In Timor-Leste, strong demand-side pressure from rapidly rising government spending continued. 123
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UNDER EMBARGO UNTIL 03.30 GMT, THUR
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ECONOMIC AND SOCIAL SURVEY OF ASIA
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PREFACE The Economic and Social Sur
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EXECUTIVE SUMMARY FORWARD-LOOKING M
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on education and health. Indebted c
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ACKNOWLEDGEMENTS This report was pr
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CONTENTS Page Foreword ............
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CONTENTS (continued) Page Australia
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BOXES Page A. Forward-looking macro
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FIGURES (continued) Page 1.20. Ineq
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TABLES Page 1.1. Main destination e
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References to dollars ($) are to Un
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ABBREVIATIONS ADB AEC APEC ASEAN AS
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SOURCES OF QUOTATIONS (a) Page 1: a
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WHY FORWARD-LOOKING MACROECONOMIC P
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▲ WHY FORWARD-LOOKING MACROECONOM
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THE STATE OF INCLUSIVE AND SUSTAINA
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MACROECONOMIC PERFORMANCE AND POLIC
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DEVELOPMENTAL MACROECONOMICS: THE C
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INVESTING IN INCLUSIVE AND SUSTAINA
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Percentage of GDP INVESTING IN INCL
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❚ ❚ ✕❚ INVESTING IN INCLUSI
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207 REFERENCES
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REFERENCES REFERENCES Abdyrasulova
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REFERENCES (2012a). The debate on e
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REFERENCES (2012). World Energy Out
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REFERENCES Ma, K-H (2008). Assessme
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REFERENCES (2011b). Child Poverty i
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REFERENCES United Nations, Economic
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STATISTICAL ANNEX STATISTICAL ANNEX
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STATISTICAL ANNEX Table 2. Poverty
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STATISTICAL ANNEX Table 4. Resource
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STATISTICAL ANNEX Technical notes T
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STATISTICAL ANNEX Source: Barro, Ro
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STATISTICAL ANNEX estimates based o
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This publication may be obtained fr
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READERSHIP SURVEY The Macroeconomic
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Half a decade since the onset of th
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