ウィスパリング同時通訳研究会コミュのOctober 2020 Asia Pacific Regional Economic Outlook IMF

MS. UTSUNOMIYA: Hello, everyone. Welcome to the press briefing on the October 2020 Asian and Pacific Regional Economic outlook. I am Keiko Utsunomiya from the Communications Department. Thank you for taking your time to join us today.

We have received some questions in advance, but please send your questions in writing if you are on the IMF Press Center. And this time, we are also taking your questions via video, or audio. So please raise your hand or send your questions in a short message using the chat function if you are on the Webex.

Now, let me introduce today's speaker. I am here with Mr. Jonathan Ostry, Acting Director of the Asia and Pacific Department. He will give a short opening remarks before we take questions from you.

Jonathan?

MR. OSTRY: Thank you, Keiko. So warm greetings from Washington and good evening to you in Asia. It is a pleasure to be with you and to give you some of the highlights of the IMF's regional economic outlook for Asia-Pacific.

The Asia-Pacific region has been hit hard by the pandemic. You've seen our projections with regional growth at -2.2 percent, 2020 will be remembered as the most severe contraction in generations. Asia is not alone in suffering a huge contraction. The world is in this crisis together and we will only emerge from it together. This is as true of the health crisis, as it is for the economic crisis. But Asia is at a different stage from the rest of the world. The region went into this crisis first, and it already can offer some valuable lessons for the world. Three lessons stand out.

First, an early public health response, when infection rates are still low, seems to be an essential stepping-stone to flattening the virus curve.

Second, relaxing containment measure only after the virus has been suppressed—and with appropriate complimentary policies such as broad testing and contact racing capacity—seems to be associated with better economic outcomes. On both counts, Asia has done well in comparison with other regions, probably due to its experience from previous pandemics.

Third, fiscal support has also been critical to reduce economic costs and underpin the recovery. Here, Asia has pulled its weight—with Asia's share of announced stimulus broadly in line with Asia's weight in the global economy.

But more hard work lies ahead. Let me stress four challenges that must be confronted. First, Asia's labor markets have been hit hard. Especially so for female and younger workers. Inequality in Asia had been rising even before the crisis, and the pandemic is hitting those at the bottom even harder than the rest. The limited reach of social safety nets and large size of informal sectors is proving to be a roadblock to supporting the most vulnerable at this critical time. Robotization, which is already well advanced in Asia, may displace even more lower skilled workers going forward. The resulting higher levels of inequality could even lead to social unrest—itself, an obvious impediment to sustained economic growth.

Second, geopolitical trade and technology tensions are threatening Asia's export driven growth model. Further decoupling across global technology hubs would have serious implications for the region's growth potential going forward.

Third, Asia's corporate and household sector entered the crisis with too much leverage on their balance sheets and the crisis is amplifying this vulnerability. And fourth, public debt burdens are also a concern for a number of emerging markets and low-income countries in the region.

These challenges are important drivers of the downgrade to our forecast. New information since our midyear update include second quarter national accounts in the region’s economies. Most notable among these data, is a much sharper contraction in India, whose economy shrank by an unprecedented 24 percent year-on-year in the second quarter, and where we now project a contraction of 10.3 percent this fiscal year.

China, which suffered the blow from the pandemic earlier than other countries has seen a very strong recovery since the first quarter lockdown, and growth has now been revised up to 1.9 percent this year, a rare positive figure in a sea of negatives.

For 2021, out projection of 6.9 percent growth is slightly stronger than we had in June. But in combination with the deep recessions this year, it nevertheless implies that a number of economies will still be smaller in the end of 2021, than before the pandemic. Generally speaking, our projections assume that domestic demand remains subdued given continued social distancing and containment measures, weak tourism, and a rather lackluster recovery by historical standards in global trade.

Economic scarring seems a near certainty at this point. Our projections suggest that potential output by the middle of this decade could be some 5 percent lower than before the pandemic, due to the fall in labor force participation and weak confidence that dims private investment.

So how then can Asia confront these challenges? Foremost, policy makers must not lose sight of the fact that this health crisis is far from over. Job one is therefore to sustain strong health policies until the pandemic is well under control. Countries need to plan now to secure and distribute vaccine supplies quickly, as they become available. And in some cases, with multilateral support.

Beyond managing the health crisis, I would emphasize five messages for economic policy. First, because the recovery is far from entrenched, macroeconomic policy support should not be withdrawn prematurely. Both fiscal and monetary policy need to play their part. Second, greater efforts to better target fiscal support to protect the most vulnerable; youth, women, and informal workers who have taken the biggest hit, is essential. Targeted support provides bigger bang for the buck, both protecting lives and livelihoods. This is important because to varying degrees, fiscal space is scarce everywhere and rising inequality could yet turn acute. Third, vigilance against emerging credit risks from corporates and households remains essential given potential impacts on financial institutions, particularly if downside risks growths materialize.

Fourth, unsustainable public debt should be addressed proactively as the message from history is that delays in dealing with this problem, only grow with time. And fifth, structural economic policies need to be geared to the world of tomorrow, not the world of yesterday. This means facilitating corporate restructuring and resource allocation, including to sectors who will pay the way for stronger, medium run, inclusive, green growth.

Thank you, and I look forward to the questions.

MS. UTSUNOMIYA: Thank you, Jonathan. I would like to go straight to Webex, Ms. Leika Kihara, from Reuters Japan. She has some questions about the region as a whole. Leika? Go ahead, please.

QUESTIONER: I have a question about China and its impact on Asia. So, as you've mentioned, China has recovered faster from the pandemic's pain than the rest of the world. How much boost would China's rebound give to Asian economies, and what are the key risks, besides the pandemic, that could weigh on Asian economies next year?

MS. UTSUNOMIYA: Okay, sorry, Jonathan, I have a very similar, I believe, related questions from Mr. Anthony Rowley, South China Morning Post, and I see him on Webex, as well. So, could we take his question before your answer? Anthony, are you there? Please, go ahead.

QUESTIONER: Okay, well, it's a very broad question, but, obviously, the Chinese economy, at the moment, is doing relatively well, and back in the Global Financial Crisis, in 2008, China acted as a dynamo, really, for the regional economy, indeed, for the global economy. So, if this situation continues for, any length of time, presumably time is importance as a dynamo of growth, is going to become more and more apparent, and I wonder what impact that is going to have on China's wider economic role in Asia. In other words, you know, will China become even more important as trade pulls and investment pull than it is at the moment, and, likewise, the United States become progressively less important, economically?

MR. OSTRY: Very good. So, thank you for those broad questions, related to China and the region. Let me start by delineating two separate issues, I think. One is what China's role is, near-term, and then more the risks for the region and China's role within it, beyond the near-term.

So, as both questioners sort of point out, China has recovered first. It's a very large economy, both globally and for the region, and because it experienced the pandemic first, and dealt with the pandemic vigorously, quite early, the trough in economic activity for China, its ability to reopen occurred much earlier than for other countries in the region and globally. So, this has meant that the recovery, and we've now seen two quarters, the second and third quarter of 2020, with very impressive growth from China, which naturally, given its role in the region, is having positive spillovers for the region, and for commodity prices, and for, broadly, participants in the global value chains, that China is a big part of.

A lot of the exports of China, however, are very specifically related to medical equipment and home electronics, the things that are really being used by the world, as a whole, during the pandemic. And, you know, the health life of these exports is probably pretty short. These -- the demand for lots of medical equipment and lots of home electronics will, eventually, peter out, and so, we will move to a different phase.

China, itself, is kind of midstream in a process of its own rebalancing, and it has multiple facets. It's a rebalancing from more export and investment led growth to a bigger role for consumption. It's a rebalancing from a large role of state enterprises in the economy to one where private demand is going to be a big -- have a big role in promoting and sustaining growth. And, indeed, our projections for China, beyond the near-term, assume a smooth handover from publicly generated growth to private demand.

We have seen some broadening of growth in the third quarter. In the second quarter, investment was taking a center stage and public fiscal policy was also having a big role, and we've seen consumption, while still lagging behind, beginning to show that it is starting to grow in the third quarter, and that is a very welcome sign, including even in some contact intensive service sectors, which is very good.

Now, in terms of the regional aspect of all this, there are a lot of things going on, in the background, that will shape China's role in the region, going forward and over the medium-term.

Our WEO discusses the role of trade and technology tensions. It discusses the role debt overhangs, very stretched balance sheets of corporate and household sectors, and all of these factors are going to shape global value chains, as countries in the region adapt their global -- their growth models to a new environment, and so, there is a lot of uncertainty about China's role in the region, and how global value chains will be reconfigured, going forward. So, I'm afraid it's a little too soon to prognosticate about what -- where the region will settle on China and its role in global value chains, in regional value chains, supply chains, a couple years from now.

MS. UTSUNOMIYA: Next, turn to a question on Japan. This is from Masaki Kondo, Jiji Press. How different would Japan's economic outlook be, if the Olympic would not be held in 2021, or significantly scaled back in its scope and size? And, also, he has a question of labor policies. How should Japan go about policies to increase incomes?

MR. OSTRY: Very good. Thank you for those, those two questions on Japan. Since the first one is on the Olympics, which is an event that brings all the countries of the world together, let me also take this opportunity to welcome Japan's commitment to multilateralism, its engagement in multilateral efforts to promote rules-based international trade, its recent agreements with the European Union and the United Kingdom, and its tremendous support for the low-income countries, highly indebted countries, through the PRGT and CCRT Trusts at the Fund, and its support for capacity development in the face of the evolving needs of many countries during this pandemic. So, this is really a very welcome example to the world.

On the Olympics, per se, let me, first of all, say that, you know, Japan has addressed the pandemic in a very effective way, but it is not a way that has been pursued by many other countries. It has been extremely effective in Japan, and it hasn't been based on hard lockdowns, hard nationwide lockdowns, as has been the case in some other countries, and it goes to show that different countries can choose different paths to flattening the virus curve, and so, this is yet another example of effective health policy.

On the Olympics, the infrastructure has largely been completed, and that would be a big channel through which the Olympics is affecting Japan's growth, and so, that is really in the rearview mirror, rather than going forward. So, a key channel would be tourism inflows, if the Olympics were to be delayed, and I think, in the grand scheme of things, there would be an effect, but it is likely to be quantitatively small, in terms of the aggregate headline GDP numbers.

It's an excellent question on incomes policy, on how to raise incomes in Japan. This has two facets. There is the immediate issue of supporting incomes of the most vulnerable, during this very difficult time, when those at the bottom are suffering the most, in terms of lost income opportunities, and I think Japan's measures, early in the crisis, have been very effective, and they need to be sustained until people can return to work and the economy is more advanced in its recovery, which the very proactive health policy has laid a clear foundation for, but, beyond that, there is the perennial and long-standing issue of generating more favorable wage and price dynamics in Japan, and continued vigorous action, by the Bank of Japan, to underpin positive increases in the general level of prices, and having more favorable dynamics between prices and wages, perhaps supported by incomes policies that could, rather than keep wage growth help to support wage growth would be something, and other policies like minimum wages and administered wages. All of these things could be thrown into the mix to support incomes going forward.

MS. UTSUNOMIYA: I would like to go to Mr. Takeshi Kawanami or Nikkei. He has a question on Vietnam. Are you there? Mr. Kawanami, please. He has sent a question online, let me read the question myself.

Vietnam has kept economic growth this year in the pandemic. What's the key point to sustain a strong economy?

MR. OSTRY: Thank you. That is a question that is important for Vietnam, but I think there's also broader lessons for the world. We've spoken about China which is, as I said in my opening remarks, a rare positive in a sea of otherwise negative growth numbers for this year. But I'll take the opportunity of this question on Vietnam to point to another positive, a very welcome one at that, and one where we see actually upside risks given recent data, including for the third quarter.

The way I would summarize the lessons from Vietnam is really taking the pandemic extraordinarily seriously very, very early on. Right at the top of the year taking very bold steps to contain the virus, to earn the trust which I think has been earned of its Vietnam citizens with media campaigns and so forth, and a broad range of containment measures which had been extraordinarily effective. And effective also through time so that when many months later, the virus reemerged in some parts of Vietnam like Danang and elsewhere, the authorities were, again, incredibly prepared and proactive in taking the appropriate containment measures which ran the gambit of locking down certain areas, tracing, testing, quarantines, and so forth. So, this is a country that really took this extraordinarily seriously, was very proactive, and thus, very effective.

The benefit was not only in a tremendous health response and results on the ground in terms of the health of Vietnamese, but also that it could reopen its economy rather earlier than most. Just like in this respect like China. The benefits are clear in that Vietnam has enjoyed a faster rebound and what seems to be a more robust rebound than many. Vietnam has a strong role in trade, including of products like electronics, like pharmaceuticals that are in high demand in this period, and, of course, has taken full advantage of that.

Its policies, including support for the most vulnerable, have been proactive, and, again, very effective even within its limited means. So, the recipe and the lesson from Vietnam is that the pandemic needs to be taken very seriously, proactively, early, and that is what lays a firm foundation for recovery, in addition to supporting policies from fiscal, and infrastructure, and so forth. I'll leave it at that.

MS. UTSUNOMIYA: Thank you, Jonathan. I want to stay in Southeast Asia. I see Mr. May Kunmakara from Phnom Penh Post.

QUESTIONER: Yes, thank you very much. I have a few questions regarding the Cambodian economy because right now I would say that there is no vaccine available for coronavirus, and we know that most of the emerging economies like Cambodia mainly relying on the exports and the influence of the tourism sectors. What does the IMF evaluate the impact of the coronavirus to the emerging economy like Cambodia? And what are the policy responses that the IMF can recommend to the governments? And on October 15, the IMF revised the projection of Cambodia to minus 2.8 from the previous projections. It is a bit better than before, and it will be rebound to 5.6 percent next year. Can you share with me what are the key elements over the revision, and what are the key sectors that you think should be rebound? Thank you very much.

MR. OSTRY: Thank you very much for that question. So, for Cambodia, I think, you know, some of the factors that have affected our projections are the collapse in tourism which, obviously, affected Cambodia's economy significantly, and the impact on its non-tourist exports, of garments, for example. Since our previous update, there were numerous order cancellations, and, you know, these are both tourist and goods exports I think lie behind the weaker outlook.

In terms of the policy imperatives, I think, again, what we have advised is a careful prioritization of expenditure to make sure that fiscal resources reach those who are most vulnerable, those at the bottom of the income scale, those in the informal sectors and so forth whose employment opportunities may have been hit really badly. With the sort of baseline recovery in global demand for some of Cambodia's main exports like garments, and some recovery in tourism, it should be possible for the recovery that we envisage for 2021 to materialize.