World Economic Analysis

IMF cut 2013 global economic outlook

          The International Monetary Fund (IMF) revised down the world growth forecast of this year 0.2% from 3.5% to 3.3% while remained the 2014 forecast at 4%. This information is also supported by the recent the Organization for Economic Cooperation and Development (OECD)’s global economic forecast that OECD cut this year forecast from 3.4% to 3.1% and the next year forecast from 4.2% to 4%. The initial forecast of OECD was constructed in November last year. The recent adjustment of the forecasts from IMF and OECD show the negative sign of global economy. Furthermore, the major concerns are eurozone’s ability to get through its crisis and the ability of the US and Japan to cut public sector deficits and debt.

US economy is still not good

The US economy is gradually getting better due to lower unemployment rate from 8.1% in May 2012 to 7.5% in May 2013. The consumer confidence is at a five-year high and new claims for jobless benefits at a five-year low. There are other indicators that show a good sign of US economy: increasing in sales of car and light-truck, higher home sales and rising in the stock prices. However, government spending cut and hike in tax rate is really harming the US economy growth, as a result, IMF estimates the economic growth to be 1.9%.

Euro zone is facing recession

          The IMF forecasts the economy of France, Spain, Italy, Portugal, Greece, Netherlands, Cyprus, and Slovenia to be contracted in this year thanks to the tight lending conditions for companies and households, job cuts and frozen investment. This is the result of sovereign debt crisis and banking troubles. The financial crisis has left 19.2 million workers with no job and is required a trillions of euros injecting into financial sector. The unemployment rate is 12.2% in 2013 up from 11.4% last year. Therefore, the eurozone growth forecast is projected to contract 0.3% but expected to be grow at 1.1% in 2014.

Asia economic growth is outperforming the world

          Asia may not be booming, but it is growing sustainably. Hence IMF expects Asia to grow at 5.7% in 2013 (with growth in emerging Asia reaching 7.2%), contributed from strong growth in China and some ASEAN economies. Consumption and private investment will be encouraged by continued robust domestic demand, favorable conditions in labor market, and low unemployment rate in several countries. Furthermore, Chinese demand and Japanese stimulus provide a boost to the region. We present the outlook of some leading countries in Asia which are China, Japan, India, and South Korea.

China: According to in data from The National Bureau of Statistics of the People’s Republic of China or NBS, China’s economy grew 7.8% in 2012 which is the slowest rate in 13 years, and authorities set their growth at a conservative 7.5%. This is the result of lower exports from declined demand in US and European markets.

Japan: Japan’s economy is gradually recovering. According to the statement of Bank of Japan and Japanese government, they upgrade its outlook of the economy as there is an upturn in exports and factory output. However the economic condition is still questionable because the exports rose just 3.8% in April which is below expectations of 5% gain from a Dow Jones Newswires survey and 5.9% increase from Reuters.

India: IMF lowered its forecast on India’s economic growth to 5.7% this year from its January forecast of 5.9% and also revised its 2014 growth forecast 6.2% from 6.3%. Downgraded economic outlook is caused by decreased investments and demand. India’s economic troubles are shown in high inflation and negative atmosphere among businesses and consumers.

South Korea: The South Korea’s finance ministry lowered its 2013 growth target to 2.3% from its estimate of 3% on March because of declined exports and sluggish domestic consumption.

Domestic consumption plays a vital role in boosting Southeast Asia economic growth

Rising private investment, increased intra-regional trade and higher domestic consumption are the main drivers to continue Southeast Asia’s growth momentum, while Europe is facing recession and US is not showing the clear sign of recovery. As a result, Asian Development Bank (ADB) forecasts GDP growth in developing Asia of 6.6% in 2013 and 6.7% in 2014 while the region’s growth was 6.1% in 2012. As presented below, Standard Cartered has a positive view on the Southeast Asia Economy.

Indonesia: In spite of faster inflation, strong household consumption and investment drive the real GDP growth from 6.2% in 2012 to 6.5% this year and 6.8% in 2014.

Malaysia: Malaysia economy is mainly driven by domestic spending and likely to enjoy sustained investment growth in 2013. Standard Cartered forecasts GDP economic growth to slow to 4.7% this year from 5.6% in 2012.

Singapore: The Singapore economic growth is estimated to be 1.3% in 2012, following a weak 1.3% in 2012. Singapore’s growth outlook is viewed to be subdued.

Vietnam: Vietnam has approved a master plan to boost the economy which is concentrated on restructuring the banking sector and state-owned enterprise during the 2013 -2020 period. Vietnam economy is expected to show mild recovery in 2013 with its GDP growth of 5.5% this year from 5% in 2012.