Upload
jag
View
40
Download
0
Tags:
Embed Size (px)
DESCRIPTION
Macroeconomic Trends in the Pacific Region --Implications for Budgeting and Financing. Pacific Economic Management Technical Assistance (PEMTA) November 2011. Outline. Key international and regional developments Fiscal & debt trends in the Pacific Region - PowerPoint PPT Presentation
Citation preview
Pacific
Economic
Management
T.A.
Macroeconomic Trends in the Pacific Region --
Implications for Budgeting and Financing
Pacific Economic Management Technical Assistance (PEMTA)
November 2011
Pacific
Economic
Management
T.A.
Outline• Key international and regional
developments• Fiscal & debt trends in the Pacific
Region• Monetary trends in the Pacific Region• Growth and inflation outlook• Conclusions
Pacific
Economic
Management
T.A.
International developments• Global economic activity has deteriorated considerably. World
economy is now expected to grow about 4% in 2011-12, downgraded from an earlier forecast of 4.5%.
• US, EU, and Australian growth forecasts have been lowered; with US and EU declines driving the global decline
growth (%, annual)
DMC=developing member country, e=estimate, p=projectionSources: IMF. 2011. World Economic Outlook (Sept). ADB. 2011. Asian Development Outlook 2011 Update
Pacific
Economic
Management
T.A.
International developments• Major stock market indices have exhibited greater
volatility• European debt concerns persist• US & NZL credit ratings have been downgraded• Unemployment in major economies remains high
Unemployment in key economies (% of labor force)
AUS=Australia, NZL=New Zealand, US=United States Sources: Australian Bureau of Statistics (ABS), Statistics New Zealand, and US Bureau of Labor Statistics.
Pacific
Economic
Management
T.A.
Key regional developments High volatility in value of key imports and exports
Nonfuel exports to the Pacific (value; y-o-y % change, 3-month m.a.)
Sources: ABS and Statistics New Zealand.
Singapore fuel exports to the Pacific (value; y-o-y % change, 3-month m.a.)
Source: International Enterprise Singapore.
Mar10
Apr May
Jun Jul Aug
Sep
Oct Nov
Dec
Jan Feb
Mar11
Apr May
Jun Jul Aug
Sep
-60
0
60
120
Diesel Gasoline
Pacific
Economic
Management
T.A.
Key regional developments High volatility in value of key imports and exports
Commodity prices(Index Jan2007=100 based on nominal prices)
Source: IMF, International Financial Statistics database
Continued growth in tourism to the PacificTourism departures to selected Pacific countries (‘000; January–August totals)
Sources: ABS and Tourism Strategy Group, New Zealand Ministry of Economic Development.
Jan07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep07
Oct07
Nov
Dec
Jan08
Feb
Mar08
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan09
Feb
Mar09
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan10
Feb10
Mar10
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan11
Feb11
Mar11
Apr
May
June
July
August
September
50
150
250
350Crude oil Coconut oil
Logs Food index
Pacific
Economic
Management
T.A.
Pacific Island economies remain vulnerable to external conditions• Volatility in key factors contributing to current
account deficits:• Lower export revenues• Remittances have fallen from ‘07 highs• Slow growth in tourism receipts
• Declining terms of trade?• Exchange rate changes in the economies of key
trading partners
Pacific
Economic
Management
T.A.
External balance Current account (% of GDP)
Source: IMF, World Economic Outlook and Article IV reports
Pacific
Economic
Management
T.A.
Outline• Key International and regional
developments• Fiscal & debt trends in the Pacific
Region• Monetary trends in the Pacific Region• Growth and inflation outlook• Conclusion
Pacific
Economic
Management
T.A.
Fiscal TrendsGovernment revenue (in million local currency units)
2007 2008 2009 2010 2011p 2012p
Cook Islands 109.8 123.9 115.3 130.3 101.8 --Fiji 1,391.3 1,454.9 1,522.4 1,486.5 1,673.6 --Kiribati 91.3 101.5 93.1 88.6 84.1 --Marshall Islands 108.2 107.1 104.9 -- -- --Micronesia, Fed. States of 145.2 149.6 152.1 163.8 -- --Nauru 24.2 35.5 56.2 57.8 44.7 65.2 Palau 89.4 85.7 88.9 89.0 --- --Papua New Guinea 6,287.0 6,038.7 5,219.3 6,890.6 7,742.0 --Samoa 486.8 454.9 492.1 621.7 596.2 --Solomon Islands 1,213.4 1,550.8 1,704.9 2,257.3 -- --Timor-Leste 1,474.1 2,537.4 2,150.5 2,367.7 2,593.0 2,633.0 Tonga 171.0 171.0 225.7 192.1 181.9 206.7 Tuvalu 34.2 30.3 31.3 24.9 23.8 23.9 Vanuatu 12,032.8 16,631.5 16,906.2 16,873.4 17,424.3 21,191.7 p=projected-- = not availableSource: ADO 2011 Update database
Pacific
Economic
Management
T.A.
Government expenditure (in million local currency units)
2007 2008 2009 2010 2011p 2012p
Cook Islands 104.8 121.1 143.6 102.7 101.2 107.4 Fiji 1,709.0 1,426.8 1,715.2 1,706.6 1,841.0 --Kiribati 85.8 98.7 90.3 87.5 88.5 --Marshall Islands 107.8 101.3 107.7 -- -- --Micronesia, Fed. States of 151.6 154.2 157.6 162.9 -- --Nauru 22.9 35.4 56.0 57.8 44.3 66.1 Palau 101.7 92.3 95.0 94.3 -- --Papua New Guinea 6,552.4 7,551.8 6,706.9 7,591.2 9,328.2 --Samoa 478.4 481.8 551.1 818.5 746.9 --Solomon Islands 1,193.7 1,552.0 1,701.0 1,871.9 -- --Timor-Leste 408.6 737.1 825.3 1,094.7 1,460.0 1,393.1 Tonga 163.5 161.4 220.6 230.1 238.0 232.1 Tuvalu 40.6 30.3 31.4 35.8 30.2 31.0 Vanuatu 12,485.0 16,765.3 17,376.9 19,815.8 17,954.8 20,734.5 p=projected-- = not availableSource: ADO 2011 Update database
Fiscal Trends
Pacific
Economic
Management
T.A.
Fiscal trendsFiscal balance (% of GDP)
Pacific
Economic
Management
T.A.
Fiscal policy guidelines Fiscal deficits have been used by some Pacific
countries to compensate for a perceived lack of private investment and dissatisfaction with rates of growthLeading to accumulation of debt
Sustainability of this course of action? Think Greece…
Fiscal stimulus should be reserved for Keynesian responses to economic downturns
Need to recognize structural sources of low growth and address these…
Pacific
Economic
Management
T.A.
Debt levels & risk of debt distress• Total debt is high in the region, but so is debt globally
• 59% Total Debt to GDP Ratio globally (CIA estimates)• High debt is a significant policy concern because it:
• restricts fiscal space and ability to engage in fiscal stimulus
• has implications for future resources constraints • Policies to address debt are affected by monetary policy
goals, share of external to total debt, and policy actions can strongly affect future debt & investment
• For example, Fiji has low external debt but central government net debt is estimated at more than 50% of GDP in 2010. Nauru moving in a similar direction as it resolves its outstanding external debt.
Pacific
Economic
Management
T.A.
IndebtednessExternal debt (% of GDP)
Pacific
Economic
Management
T.A.
Total Debt to GDP
From: IMF Staff Report for the 2010 Article IV Consultation
Pacific
Economic
Management
T.A.
Outline• Key international and regional
developments• Fiscal & debt trends in the Pacific Region• Monetary trends in the Pacific Region• Growth and inflation outlook• Conclusions
Pacific
Economic
Management
T.A.
Monetary TrendsLow growth and high foreign reserves have led to
accommodative monetary policies to support growth (e.g. Fiji, Tonga, Samoa)
Concern over inflation has led some central banks to raise rates (e.g. PNG)
Recent exchange rate movements have adversely affected overseas investment
Capital market developments have affected valuations of trust funds in the Pacific
Pacific
Economic
Management
T.A.
Outline• Key international and regional
developments• Fiscal & debt trends in the Pacific Region• Monetary trends in the Pacific Region• Growth and inflation outlook• Conclusion
Pacific
Economic
Management
T.A.
Prospects for GDP growth
•Pacific region: 6.4% in 2011; 5.5% in 2012•Pacific islands (excl. PNG and Timor-Leste): around 2%
0 2 4 6 8 10 12
Tuvalu
Tonga
Kiribati
Marshall Islands
Cook Islands
Fiji
FSM
Palau
Samoa
Vanuatu
Nauru
Solomon Islands
Papua New Guinea
Timor-Leste
Change in real GDP (%)
-3
0
3
6
9
2007 08 09 10e 11p 12p
Pacific regionPacific islands
2011
2012
Source: ADB estimates.
Pacific
Economic
Management
T.A.
Inflation outlook
•Pacific region: 8.4% in 2011; 5.9% in 2012•Pacific islands: 6.4% in 2011; 3.4% in 2012
0 2 4 6 8 10 12
Tuvalu
Nauru
Tonga
Cook Islands
Samoa
Solomon Islands
Marshall Islands
Vanuatu
FSM
Palau
Kiribati
Fiji
Timor-Leste
Papua New Guinea
Change in consumer price index (%, annual average)
0
4
8
12
2007 08 09 10e 11p 12p
Pacific regionPacific islands
2011 2012
Source: ADB estimates.
Pacific
Economic
Management
T.A.
Outline• Key International and regional
developments• Fiscal & debt trends in the Pacific Region• Monetary trends in the Pacific Region• Growth and inflation outlook• Conclusions
Pacific
Economic
Management
T.A.
Conclusions• The Region remains vulnerable to an
uncertain and challenging global economic environment.
• Debt has risen as countries have attempted to stimulate growth. This has restricted the fiscal space for Keynesian stimulation.
• There is a need to expand the fiscal space so that the Government has the ability to act in the case of adverse external shocks.
Pacific
Economic
Management
T.A.
Conclusions (continued)
• Urgent need to focus on fiscal and structural adjustment to generate resources for development
• Medium-term budgeting framework provides an effective tool for resource allocation and prioritization
• Generating the political will is essential• Importance of an open policy making process
in which public views are solicited
Pacific
Economic
Management
T.A.
VinakaFor more information:
http://beta.adb.org/publications/series/