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International Monetary Fund. Asia and Pacific Dept

Abstract

Asia has rebounded fast from the depth of the global crisis. Initially, the region was hit extremely hard, with output in most countries shrinking by much more than even those nations at the epicenter of the crisis. But starting in February 2009, Asia's economy began to revive. Exports and industrial production have increased again, financial pressures have eased, confidence has largely been restored. What explains this remarkable comeback? What challenges does the recovery pose to Asian policymakers? These are the main questions addressed in the IMF's October 2009 "Regional Economic Outlook: Asia and Pacific." The report discusses the latest developments in Asia, examines the prospects for the period ahead, and considers the policy steps needed to sustain the recovery and rebalance Asia's medium-term growth. Published biannually in May and October.

International Monetary Fund. Asia and Pacific Dept

Abstract

Asia has rebounded fast from the depth of the global crisis. Initially, the region was hit extremely hard, with output in most countries shrinking by more than even those nations at the epicenter of the crisis. But starting in February, Asia’s economy began to revive. Exports and industrial production began to increase again, first slowly, then at a rapid rate. Now Asia is leading as the world pulls out of recession (Figure 1.1).

International Monetary Fund. Asia and Pacific Dept

Abstract

Is the recovery from the global financial crisis now secured? The crisis that stalled Japan’s growth miracle in 1990s may provide some clues. This chapter explores the parallels between the two crises and draws potential implications for the current global recovery. On two occasions during Japan’s crisis, “green shoots” withered as the economy was buffeted by severe external shocks aggravated by a still-fragile financial system, forcing policymakers to intervene with more aggressive support. A sustainable recovery took hold only when spillovers from a favorable external environment reinvigorated private demand and the financial and corporate sector problems at the heart of the crisis were adequately addressed. Japan’s experiences suggest three possible lessons for policymakers today. First, green shoots do not guarantee a recovery, implying a need to be cautious about the outlook. Second, financial fragilities can leave an economy vulnerable to adverse shocks and should be resolved for a durable recovery. And third, while judging the best time to withdraw policy support is difficult, clear medium-term plans may help.

International Monetary Fund. Asia and Pacific Dept

Abstract

In recent years, despite relatively flat investment in most of the region, corporate savings have risen in Asia, more than in other regions. Since Asian households have not reduced their savings to the same extent, the increase in corporate savings has led to higher private savings in the region. Decisions over retained earnings are related to the strength of corporate governance and the degree of financial market development, particularly in Asia. Hence, reforms in these areas must be further deepened to reduce private savings, contribute to higher private consumption, and help regional rebalancing in the coming years.