The Global Economy in Turbulent Times

CHAPTER 20 TW3 2013: Tension and Risks; a Peek at 2014¹

It’s that time of the year again—to look back over the past 12 months, take stock and review, and assess the outlook for next year, especially for emerging Asia (EA) and ASEAN. The year 2013 was not a good one—most quarterly reviews ended with a downgrade. In April last year, the IMF’s forecast was for global GDP to grow by 4.1 percent in 2013; while GDP of advanced economies (AEs) was expected to expand at 2.0 percent and EA, 7.9 percent. ASEAN-5 (Indonesia, Malaysia, the Philippines, Thailand, and Vietnam) would raise gross domestic product (GDP) by 6.2 percent. By June 2013, the outlook further dimmed. In its October review, growth prospects were again downgraded (indeed, in 9 out of the last 10 updates) so that by this December, the consensus estimate by the major reviewers was for the world economy to grow by only 2.9 percent in 2013; AEs by less than 1 percent, and EA, 6.0 percent (with ASEAN-5 rising by only 5.1 percent).²

Much of the downward revision reflected continuing basic fiscal challenges and uncertainties in the United States and Europe, and the marked slackening of growth in the major emerging market economies (EMEs) and its spillover effects. Still, EA as a group managed to grow at six times the pace of AEs and against ASEAN-5, five times. This significant growth-rate gap reflects poorly on the recovery process in AEs.

Similarly, it was a bruising year for Asian bonds, stocks, and currencies, whose markets ...