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International Monetary Fund. Asia and Pacific Dept

Abstract

Asia has achieved remarkable economic success over the past five decades. Hundreds of millions of people have been lifted out of poverty, and successive waves of economies have made the transition to middle-income and even advanced-economy status. And whereas the region used to be almost entirely dependent on foreign know-how, several of its economies are now on the cutting edge of technological advance. Even more striking, all of this has happened within just a couple of generations, the product of a winning mix of integration with the global economy via trade and foreign direct investment (FDI), high savings rates, large investments in human and physical capital, and sound macroeconomic policies.

International Monetary Fund. Asia and Pacific Dept

Abstract

The global expansion that began two years ago appears to have peaked and become less synchronized across economies. While economic activity moderated in advanced economies during the first half of 2018 compared to 2017, it remained steady in most emerging economies (Figure 1). Growth was lower than expected in the euro area, Japan, and the United Kingdom. Meanwhile, in the United States, domestic demand continued to be buoyant, underpinned by low unemployment and a historically large, temporary fiscal expansion. Among emerging market economies, growth remained strong in emerging Asia but weakened in Argentina, Brazil, and Turkey. Several downside risks highlighted in the April 2018 World Economic Outlook (WEO) have increased or partially materialized, such as rising trade tensions and capital outflows from emerging economies with weaker fundamentals. With this more mixed global growth picture, there are already signs that trade is slowing.

International Monetary Fund. Asia and Pacific Dept

Abstract

Asia’s heavy reliance on trade in general, and its integration in global value chains in particular, have been critical elements behind the region’s stellar growth record. But rising income levels and wages in the region combined with a less buoyant medium-term outlook in advanced economies suggest the need for Asia to reconsider its growth model, currently oriented toward meeting final demand in other regions (IMF 2016, Mano 2016). In addition, China has not exited labor-intensive light manufacturing sectors as quickly as Korea and Japan did in earlier eras, possibly limiting opportunities for the next wave of Asian developing economies and again suggesting the need for a new model (Mathai and others 2016). Finally, the secular decline in manufacturing’s share in employment combined with the fast rise in automation (for example, robotics), also points to a needed shift toward tradable services (IMF 2018e).

International Monetary Fund. Asia and Pacific Dept

Abstract

The April 2017 Regional Economic Outlook: Asia and Pacific documented that productivity growth in a number of economies in Asia—just as in the rest of the world—slowed after the global financial crisis, and that this slowdown was most severe in the region’s advanced economies and in China (Figure 11). In addition, the slowdown was not a temporary phenomenon, but rather has persisted and even become the “new normal” in some economies. IMF (2018c), the third background paper to this Regional Economic Outlook, complements the earlier analysis, which was based on national accounts data, by examining firm-level data from the Orbis data set for six advanced and emerging market Asian economies for which sufficient data are available (China, Japan, Korea, Malaysia, the Philippines, and Thailand), during the period 2003–15.

International Monetary Fund. Asia and Pacific Dept

Abstract

The final challenge for Asia addressed in this Regional Economic Outlook: Asia and Pacific is how to reap the potential benefits of the digital revolution while minimizing its costs. While digitalization and automation are not new, they have accelerated in recent years, and a new wave of innovation—triggered by advances in artificial intelligence, robotics, computing power, and cryptography, as well as the explosion of big data—is reshaping the global economy. More so than during past periods of innovation, including the spread of personal computers in the 1980s and the rise of the internet in the 1990s, today’s technological advances are multiple and overlapping, creating synergies and accelerating outcomes. The digital revolution is affecting all sectors and activities of the economy, with a far-reaching social and economic impact. The new technologies are general-purpose in nature, with the potential—over time—to transform the global economy, substantially boost productivity, and fundamentally alter the way humans live and work, much as the steam engine and electricity did. That said, history suggests that such benefits may be observed only with a delay—after a sufficient stock of the new technology and complementary innovations, as well as the capital investments to implement them, are built up. And by the same token, the substantial disruptions and dislocations that may occur may also take place only over time. It is likely that neither the opportunities nor the challenges related to digitalization have yet become fully apparent.

International Monetary Fund. Asia and Pacific Dept

Abstract

Asia is the world’s most dynamic economic region. But it faces a number of serious challenges over the medium to long term—that its trade-reliant growth strategy will no longer be viable (at least in its current form), that population aging will weigh on many dimensions of economic performance, that productivity growth may not accelerate again, and that the ongoing digitalization of its economies may lead to major disruptions even as k boosts productivity over time.

Delphine Prady, Herve Tourpe, Sonja Davidovic, and Soheib Nunhuck
During the 2020 pandemic, the majority of countries have provided income support to households at an unprecedented speed and scale. Social distancing measures and the large penetration of mobile phones in emerging markets and developing economies (EMDEs) have encouraged government-to-person (G2P) transfers through mobile platforms. This paper presents a comprehensive framework for sustainable money solutions in support of social assistance. The framework consists of eight building blocks that may help policymakers i) take stock and assess emergency fixes taken to scale up mobile money in a crisis context and ii) develop sustainable long-term solutions for mobile G2P transfers.
Sandile Hlatshwayo, Anne Oeking, Mr. Manuk Ghazanchyan, David Corvino, Ananya Shukla, and Mr. Lamin Y Leigh
Corruption is macro-relevant for many countries, but is often hidden, making measurement of it—and its effects—inherently difficult. Existing indicators suffer from several weaknesses, including a lack of time variation due to the sticky nature of perception-based measures, reliance on a limited pool of experts, and an inability to distinguish between corruption and institutional capacity gaps. This paper attempts to address these limitations by leveraging news media coverage of corruption. We contribute to the literature by constructing the first big data, cross-country news flow indices of corruption (NIC) and anti-corruption (anti-NIC) by running country-specific search algorithms over more than 665 million international news articles. These indices correlate well with existing measures of corruption but offer additional richness in their time-series variation. Drawing on theory from the corporate finance and behavioral economics literature, we also test to what extent news about corruption and anti-corruption efforts affects economic agents’ assessments of corruption and, in turn, economic outcomes. We find that NIC shocks appear to negatively impact both financial (e.g., stock market returns and yield spreads) and real variables (e.g., growth), albeit with some country heterogeneity. On average, NIC shocks lower real per capita GDP growth by 3 percentage points over a two-year period, illustrating persistence in the effect of such shocks. Conversely, there is suggestive evidence that anti-NIC efforts appear to have a sustained positive macro impact only when paired with meaningful institutional strengthening, proxied by capacity development efforts.
Yong-jin Kim and Mr. Se-Jik Kim
This paper presents a multisector growth model where education enhances general human capital, which is essential for increasing or maintaining the mobility of workers across industries. The paper shows that education, combined with international trade, can affect growth positively in the long run by raising workers’ ability to adapt and move easily to industries with the greatest productivity in each period. Depending on the initial ratio of general-to-specific human capital stock, multiple equilibrium growth paths can exist, including a poverty trap. If the ratio is not substantially low, trade liberalization can allow an economy in a poverty trap to transform into one with continuous education and higher output growth.