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

ECONOMIC AND SOCIAL SURVEY OF ASIA AND THE PACIFIC 2013
Domestic demand-to-GDP ratio, 2008-11
Box 1.4. (continued)
Figure C. The role of domestic demand in Asia-Pacific
has largely unchanged since the crisis
Total final consumption expenditure and gross fixed capital
formation as a share of GDP (%)
160
140
120
100
80
60
40
40 60 80 100 120 140 160
Domestic demand-to-GDP ratio, 2000-07
Source: ESCAP, based on World Bank World Development Indicators.
As expected, economies associated with a new normal of lower
growth exhibit greater trade exposure. In the 27 economies
that likely face a “new normal” lower growth, goods and
services trade accounted for nearly 1.1 times of GDP in the
past decade, compared to below 90% of GDP in the other 16
economies. The former group of economies appears to rely
more on high-income markets for their export earnings and
less on commodity items (food, fuel and ores and metals).
But whether stylized facts can be firmly established will
require further investigation. After all, economic structure
and policy directions of these economies vary noticeably.
These problems ahead are not inevitable, with the region
having the tools in its own hands to avoid the phenomenon
of a “new normal” of lower growth. In addition to diversifying
export markets, a widely discussed strategy to avoid the
new normal is to boost domestic demand as a new or
second source of growth. This is especially critical for more
open economies. The progress at present appears gradual (see figure C). The share of total consumption and fixed investment
in GDP in Asia and the Pacific has been mostly unchanged since the crisis began, or even lower in open economies, such as
Azerbaijan, Brunei Darussalam, Turkmenistan and Taiwan Province of China. Implementation of policies to support domestic
demand can be accelerated, including through enhancing the agricultural and services sectors, strengthening small businesses,
providing stronger social safety nets to reduce precautionary savings, and upgrading public infrastructure.
a The broad macroeconomic assumptions over the next years are that growth in developed economies gradually picks up but remains
anaemic; the Chinese economy shifts towards a more sustainable growth as rebalancing moves forward; global commodity prices
remain high and volatile relative to the past trends; and limited progress on reorienting sources of growth towards domestic demand in
developing Asia-Pacific economies.
b The emergence and magnitude of a "new normal" of lower growth is clearly sensitive to which “pre-crisis” period is used. Some analysts
argue that the booming years of 2006-2007 were largely fuelled by imbalanced growth in developed economies, thus generally viewed
as exceptional and unsustainable.
demand, which proved to be rather resilient in 2012,
employment and earnings growth in 2013 are likely
to remain constrained. Macroeconomic management
in these outperforming economies and in economies
with relatively free capital movements will also be
complicated by the recent liquidity injections in
developed economies. These liquidity injections
have already intensified capital flows and domestic
currency volatility in some economies of the region.
In general, the potential effects of volatile short-term
capital flows warrant close surveillance.
China and India are expected to rebound somewhat
after a sharp slowdown in 2012. China is forecast
to grow by 8% in 2013, slightly higher than 7.8%
in 2012, but 0.8 of percentage point lower than the
2012 forecast provided in the Economic and Social
Survey of Asia and the Pacific 2012 (ESCAP, 2012b)
released in May. Growth in India in 2012 was notably
lower than previously forecast, but the economy is
projected to recover moderately to 6.4% in 2013.
Improved, although still tepid, global trade should
help to support growth in export-led economies in
East and North-East Asia and South-East Asia.
For example, growth in Hong Kong, China, the
Republic of Korea and Singapore is projected at
around 2.3-3.5% in 2013, up from 1.4-2% in 2012.
Meanwhile, growth in North and Central Asia is
likely to remain stable, benefiting from elevated
global energy prices and sustained growth in the
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