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Extracts of the1997 APECECONOMIC OUTLOOKEconomic Performance and Prospects IN THE APEC Region November 1997 Asia-Pacific Economic Co-operation Foreword Since its establishment by APEC Ministers in Jakarta in November 1994, the Economic Committee has undertaken a broad range of research and analysis in support of APEC’s work both on trade and investment liberalization and facilitation and on economic and technical cooperation. The annual Economic Outlook has become an important part of that work program. Not only has it has provided a review of economic developments and prospects in the region and in individual member economies, but also it has addressed topical structural issues that are key to understanding these developments and trends. In both respects, it provides an analytical foundation for policy-oriented work and discussions by APEC senior officials and other APEC fora. The 1997 APEC Economic Outlook is the third in the series of Outlooks by the Economic Committee. It has been prepared under the leadership of the Republic of Korea and more specifically by the Korea Institute for International Economic Policy (KIEP). This practice builds upon the tradition established in the Committee’s first two years whereby individual APEC economies take on the responsibility for coordinating development of the document. The 1995 APEC Economic Outlook (APEC Economic Committee, November 1995) was produced under the leadership of Japan’s Economic Planning Agency while the 1996 APEC Economic Outlook (APEC Economic Committee, November 1996) was produced with the United States Council of Economic Advisers taking overall responsibility. The preparation of this year’s Outlook has involved particular challenges. Economic developments in the region have been significantly affected by the currency instability that affected some APEC member economies. This major event, which is without precedent in this region, unfolded in the third quarter of 1997 during the final stages of preparation of the document. With the close cooperation of the APEC Finance Ministers’ process, a review and brief analysis of these events has nevertheless been reflected in this document. However, the situation continues to unfold as the document goes to press; a full considered perspective will only be possible several months hence. A second challenge has involved the structural analysis in this year’s Outlook. The theme chosen --"open regionalism"-- has close links to three trade and investment-related analytical projects that have been finalized by the Economic Committee this year. These include The Impact of Trade Liberalization in APEC, for which Japan and Singapore took primary responsibility, a study that uses computable general equilibrium (CGE) model simulations to assess the impact of APEC’s trade and investment liberalization and facilitation measures as set out in the Manila Action Plan for APEC (MAPA); The Impact of Investment Liberalization in APEC, the preparation of which was led by Chinese Taipei, a study which draws on member economy policy reviews and industry case studies to draw some general conclusions about the motivations for and efficacy of investment rule-making and liberalization; and The Impact of Subregionalism on APEC, responsibility for which was also taken by Chinese Taipei, a study that examines in both theoretical and empirical terms the interaction between trade and investment liberalization on a subregional basis through agreements such as NAFTA, AFTA and CER as well as through informal "growth triangles," and more broadly-based liberalization through APEC and the WTO. The structural chapter of the Outlook attempts to pull these various strands of work together, including by providing some supporting evidence also drawn from CGE model simulations on comparative benefits of alternative approaches to APEC trade liberalization. It is intended that this body of work provide analytical support for APEC’s continuing, high-priority work on trade and investment liberalization and facilitation. As an institution that has been created at the dawn of the information age, APEC has pioneered a "virtual" mode of operation. It functions with a very small Secretariat and relies accordingly on the voluntary contributions of the time and energy of experts in member economies to carry out the large majority of its work. In the case of the present study, particular thanks are due to Dr. Jong Nam Oh who chaired the APEC Economic Committee Task Force that developed this report as well as to Dr. Soogil Young, the newly-appointed and very active President of KIEP and his team of researchers, most particularly Dr. Sangkyom Kim, who developed successive drafts of the document for consideration by the Task Force. Thanks are also due to Tom Engle, Program Director at the APEC Secretariat, who has provided both logistical and technical support to the Economic Committee in this work and, in particular, taken responsibility for seeing the study through to publication; and to Dan Ciuriak, Coordinator, Asia Pacific Research at the Department of Foreign Affairs and International Trade in Canada, who has assisted me in my role as Chair of the Committee and taken particular responsibility for the final editing of the text. In 1996, APEC member economies averaged 3.7 percent real growth, the highest annual growth rate since 1991. Strengthened growth in the region’s two largest economies, the United States and Japan, led the way, but the other developed economies in the region also had solid results overall and the developing economies on both sides of the Pacific sustained high growth. A notable success during 1996 was the rebound from recession in Mexico and Papua New Guinea, which meant that all APEC members registered positive results for the year. At the same time, the easing of inflationary pressures due to the combined effect of this more balanced growth region-wide and generally tight financial policies reduced the risk of overheating in the region as a whole, laying the basis for sustained expansion in 1997. However, widening current account deficits in some member economies, which were identified as a concern in the 1996 APEC Economic Outlook, became increasingly an issue over the course of the year, particularly in the context of an unexpectedly sharp slowdown in export growth. In 1997, the APEC region has witnessed more variability in growth than it did in 1996, with abrupt shifts of growth momentum within the region from quarter to quarter and from economy to economy. This situation has reflected a combination of the normal progression of some economies through their business cycles, the impact of singular events such as Japan’s consumption tax increase in April, and the exchange and financial market instability of the second half of the year. Nonetheless, the overall growth expected in the APEC region in 1997 of 3.4 percent is only modestly slower than the 3.7 percent of 1996 and indeed equal to the growth rate recorded in the boom of 1994. On balance, the region is expected to sustain its expansion into 1998, albeit at a somewhat more moderate rate of 3.1 percent. This reflects continued low interest rates and very little evident inflationary pressure in the region as a whole, although the impact of the currency instability could have some impact on inflation in some economies in the near term. The United States is expected to see growth moderate from the very strong 3.7 percent anticipated in 1997 to the mid-2 percent range in 1998; however, this should be largely offset from a regional perspective by the rebound in growth expected in Japan as implementation of structural economic reforms, including deregulation, supports recovery in that economy. The other developed economies in the region, Australia, New Zealand and particularly Canada are all well positioned with solid fundamentals to sustain growth into 1998 and beyond, while the newly industrialized economies -- Hong Kong, China; Korea; Singapore; and Chinese Taipei -- as well as Chile appear to be poised for somewhat stronger growth, having passed the low point of their respective business cycles in 1996 or early 1997. Among the developing economies, China is expected to have the highest growth in 1998 and into the medium term. As regards the APEC developing economies in Southeast Asia, while they have seen their growth prospects dampened in the short term by the recent exchange and equity market instability, their fundamentally bright long-term growth prospects have not been altered. Mexico and Papua New Guinea are expected to sustain their respective recoveries over the next several years. In terms of specific elements of the outlook, the sustained expansion in the APEC region over a period of years has been an important factor in improving conditions for job growth and reducing unemployment rates. In this respect, the labor market situation in the region has remained better than elsewhere in the world. With respect to trade, APEC as a whole has, over the past decade, experienced rapid growth, raising its share of world trade to 50.6 percent in 1996, a gain of more than 7 percent over this period. In 1996, however, notwithstanding the overall acceleration of growth in the APEC region, export growth slowed sharply to 4.6 percent, partly due to last year’s semiconductor price slump, which led to a sharp terms-of-trade deterioration for many APEC member economies. With respect to investment, the APEC region again witnessed large flows of FDI in 1996, with China and the United States continuing to be major destinations. However, external imbalances continue to be an issue in the region. In 1996, eleven APEC member economies evidenced current account deficits while seven economies had surpluses. In total, the region had a net deficit approaching US$120 billion or about 0.75 percent of the total GDP of member economies. Amongst the individual member economies, eight had deficits exceeding 3 percent of GDP, including six above 4 percent of GDP. In principle, current account deficits need not be a problem, particularly in economies that are growing rapidly. If the capital inflows needed to finance deficits are in fact underwriting an expansion in the productive capacity of an economy, current account deficits need not be associated with an increase in the difficulty of servicing foreign debt. This is particularly true if the capital flows are long-term in nature. However, if deficits in current transactions represent unproductive investments or consumption, the consequent build-up in foreign debt can create problems for an economy. These problems can be exacerbated if the debts are predominantly short-term in nature, as creditors become unwilling to roll over the loans. Moreover, if the banking sector is under stress or if prudential supervision is weak, problems for the domestic economy can be made worse. In these cases, a period of consolidation and slower growth may be necessary to restore stability. In 1997, a number of Southeast Asian economies that had been growing rapidly and maintaining current account deficits experienced instability. Many of these economies that had maintained fixed or managed floating exchange rates moved to a much more flexible exchange rate system. Weaknesses in many of the currencies in the region have been accompanied by volatility and large declines in regional stock markets. The instability emerged first in Thailand and then spread to several neighboring economies, notably Indonesia, Malaysia, and the Philippines, reflecting spillover effects, and was exacerbated by speculative pressures that doubtless contributed to the volatility in foreign exchange and equity markets. This experience illustrates the increased economic interdependence in the region and the mutual interest in maintaining financial stability. The process of arresting and recovering from a period of instability can be speeded by the adoption of policies to address the underlying causes. In this regard, the instability has underscored the importance of sound macroeconomic policies and pointed clearly to the need to strengthen financial sectors and to increase transparency regarding economic and financial policies so that markets can differentiate between economies and their respective prospects. Moreover, to the extent that the currency turbulence has contributed to the resolution of unsustainable policy mixes and currency misalignments in the region, it may have even enhanced longer-term prospects, provided economies do not allow the recent depreciation to lead to a ratcheting up of inflation rates. In addition to resolving these current issues, APEC member economies face structural challenges in areas such as underdeveloped financial markets, inadequate infrastructure, shortages of skilled workers and the need to open up domestic markets to greater competition. APEC member economies are undertaking reforms along these lines, including market deregulation, opening up of trade and capital markets, and reducing the size of the government sector through expenditure cuts and privatization. However, the pace of reforms may need to be accelerated to maintain the confidence of markets. In this respect, strengthening of economic and technical cooperation in areas such as human resource development and small and medium-sized enterprises to build capacities of member economies to implement reforms can contribute significantly to the improvement of economic fundamentals that is needed to pre-empt future instances of instability. One key area for continued action to strengthen the long-term sustainable growth prospects for the region is continued trade and investment liberalization and facilitation. In the APEC region, the process of liberalizing markets has been sustained with a combination of progress towards the Bogor goals through ongoing improvements in member economies’ Individual Action Plans, new initiatives such as the APEC Trade Ministers’ call for early voluntary sectoral liberalization, global initiatives through the WTO, and the broadening and deepening of subregional trading arrangements such as NAFTA, AFTA and CER. In a series of companion studies being published simultaneously with this Outlook, and in the structural chapter of this document, the Economic Committee has assessed the importance to the region of sustaining this record. The Impact of Trade Liberalization in APEC shows that, with implementation of the Manila Action Plan for APEC (MAPA), real GDP in APEC as a whole would increase by 0.4 percent (US$68.5 billion), and in the world by 0.2 percent (US$70 billion), on a sustained basis. Overall effects of MAPA on the global GDP are estimated to be about one-fourth of the impact of the Uruguay Round. Meanwhile, The Impact of Investment Liberalization in APEC documents the benefits of foreign direct investment and the impact of the gradual move in the region towards more open investment regimes. As the study notes, investment liberalization appears to be especially effective in the context of broader market-oriented economic reforms. Finally, the study on The Impact of Subregionalism on APEC concludes that the emergence of powerful integrative forces on a subregional basis, although strictly speaking inconsistent with the concept of open regionalism, has led to stronger trade creation than trade diversion and has helped generate momentum for global liberalization and thus, on balance, worked towards a more open global trading environment. The structural chapter of this Outlook complements these studies by directly examining the benefits of open regionalism as adopted by APEC and specifically by comparing the estimated impact of APEC trade liberalization under unilateral liberalization to the likely impacts under alternative approaches such as preferential agreements, conditional liberalization with reciprocation by trade partners, and global trade liberalization. The results confirm that the most beneficial scenario for both APEC and the world involves the realization of global free trade. Under this scenario, the APEC region gains over US$67 billion in income while the world as a whole gains over US$168 billion. While this conclusion is not necessarily surprising, what is striking is the large opportunity cost to non-APEC economies should they choose to "free ride" on APEC trade liberalization measures rather than to reciprocate them. The results indicate that these costs could be as high as US$47 billion, suggesting that non-APEC economies could gain substantially by eliminating distortions in their import markets. Another interesting finding is that the estimated benefits to APEC of unilateral (or unconditional) trade liberalization--over US$62 billion--are very similar to if not greater than the gains under the conditional liberalization scenarios. This suggests that while global free trade produces the most favorable results for APEC economies, unilateral liberalization by the APEC region captures the main part of the potential benefits for its member economies, regardless of whether non-APEC regions reciprocate or not. By contrast, the benefits to APEC emanating from a preferential trade area, while sizable, are smaller--about US$52 billion. These quantitative results support the view that APEC’s concept of open regionalism, with its core principle of non-discrimination, forms a sound basis for economic cooperation within APEC and for sustained and equitable long-term economic growth in the region. Economic Performance and Prospects in the APEC Region 1. Recent Developments and Prospects Regional growth sustained but shocks change mix In 1996, the average real GDP growth rate for all APEC member economies was recorded at 3.7 percent. This was the highest annual growth rate since 1991, albeit 0.7 percentage points short of the 4.4 percent average during 1986-1990. A key to the solid output growth for the area as a whole was the strengthened growth in the United States and Japan. Economic growth accelerated in both economies to 2.8 percent in the United States (0.8 percentage points higher than in 1995) and to 3.5 percent in Japan (2.1 percentage points higher than in 1995). Among other APEC developed economies, Australia’s growth in 1996 remained in the mid-3 percent range while New Zealand experienced a moderation of growth to 2.7 percent from the rapid pace of the preceding several years. Canada also had lower annual average growth in 1996 but experienced a gain in growth momentum in the second half of the year. The APEC developing economies in East Asia sustained in 1996 the rapid expansion that they had enjoyed since the mid-1980s, in the process of which several of these economies -- namely Hong Kong, China along with Korea, Singapore, and Chinese Taipei (the Newly Industrialized Economies or NIEs) -- emerged as advanced economies in terms of GDP per capita and other characteristics. The NIEs overall, however, witnessed a moderation in growth in 1996 from 7.3 percent in 1995 to 6.3 percent in 1996. Korea and Singapore slowed markedly, by 1.8 percentage points in each case. Chinese Taipei slowed marginally (by 0.3 percentage points) while Hong Kong, China grew modestly faster (by 0.4 percentage points). A key factor behind this overall slowdown in the NIEs was the downturn in the electronics industry in 1996. Growth in China moderated to 9.7 percent in 1996 from the torrid, double-digit rates experienced in the preceding several years. The soft landing has enhanced China’s prospects for steady growth in the coming years. The APEC developing economies in Southeast Asia, which also ranked amongst the world’s fastest growing economies, continued to exceed the APEC average in 1996 at 7.2 percent. However, in contrast with the moderate upturn in developed economies, the high growth pattern that these economies had maintained began to show signs of change. More specifically, with the notable exception of Brunei Darussalam and the Philippines, growth in 1996 in these economies moderated by between 0.3 to 1.9 percentage points. In Indonesia, Malaysia and Thailand, this easing reflected weakening of export performance and tightening of domestic financial policies. The Latin American APEC members experienced strong growth in 1996. Mexico rebounded dramatically from recession in 1995 to record 5.1 percent GDP growth. Chile saw growth moderate to a still-strong 7.2 percent from 8.5 percent in the preceding year. Papua New Guinea also rebounded from recession in 1995 to record 1.9 percent growth in 1996 on the basis of preliminary estimates. In 1997, the APEC region has witnessed more turbulence in growth than it did in 1996, with abrupt shifts of growth momentum within the region from quarter to quarter and from economy to economy. This has reflected a combination of the normal progression of some economies through their business cycles, the impact of singular events such as Japan’s consumption tax increase in April, and the exchange and financial market instability of the second half of the year. Nonetheless, the overall growth expected in the APEC region in 1997 of 3.4 percent is only modestly slower than the 3.7 percent of 1996 and equal to the growth rate recorded in the boom of 1994. Moreover, world economic conditions are currently broadly favorable for sustained growth into 1998. This reflects continued low interest rates and very little evident inflationary pressure in major economies, along with the structural reforms undertaken by many economies to enhance the role of market forces. In the United States, growth momentum strengthened in the first half of 1997, as GDP rose at a revised 4.9 percent annualized rate in the first quarter (on a quarter-over-quarter basis) and a more moderate 2.2 percent annualized rate in the second quarter. The preliminary estimate of third quarter growth of 3.5 percent supports the expectation that GDP will grow in the mid-3 percent range for 1997 as a whole. In 1998, growth is expected to moderate to the mid-2 percent range. In Japan, growth trends in the first half of 1997 were strongly affected by the increase in the consumption tax from 3 percent to 5 percent on April 1, which induced a shift in consumer expenditure into the fourth quarter of 1996 and the first quarter of 1997 from the second quarter. This boosted annualized growth to 5.7 percent in the first quarter (on a quarter-over-quarter basis), but contributed to a sharp decline in economic activity in the second quarter. A rebound in growth is expected for the second half of 1997, and the implementation of structural economic reforms, including deregulation, is expected to support the recovery thereafter. Growth has also strengthened in Canada in 1997, with annualized real GDP growth of 3.7 percent in the first quarter (on a quarter-over-quarter basis) and 4.9 percent in the second quarter; forecasters on average are now predicting real GDP growth of 3.7 percent for 1997 as a whole. The developed economies in Oceania are well positioned for sustained growth. In Australia, the pace of expansion stepped up markedly in the first half of 1997 with real GDP growth averaging about 1 percent per quarter. For the year as a whole, and indeed for the period 1997-2000, 3.5 percent growth is expected, underpinned by the structural soundness of the household and corporate sectors. In New Zealand, the brisk rebound in the second quarter of 1997 appears to have marked a turning point in the cycle following a period of slowing growth in response to monetary restraint. It is anticipated that lower interest rates, increased government spending and an income tax reduction will spur growth to 4.2 percent for fiscal year 1998/1999, following a moderate expansion of 2.4 percent in fiscal year 1997/1998. Among the Asian NIEs, trends in 1997 have so far been mixed. Chinese Taipei and Hong Kong, China have enjoyed firming growth due to a recovery of export growth and expansion of domestic demand. Growth strengthened to 6.1 percent year-over-year in Hong Kong, China in the first quarter of 1997 and to 6.6 per cent year-over-year in the first half in Chinese Taipei. In Korea and Singapore, the growth slowdown that started in 1996 appears to have bottomed out in the first quarter with the stronger second quarter results pointing to improving prospects over the course of this year. In Korea, second quarter growth accelerated to 6.3 percent from 5.4 percent in the first quarter; in Singapore, the recovery was even stronger to 7.8 percent in the second quarter from 4.1 percent in the first. Reflecting these trends and developments, the overall growth rate of the four NIEs in 1997 and 1998 is expected to remain on average close to the 6.3 percent achieved in 1996. Among the Asian developing economies, China is expected to have the highest growth in the medium term. The ongoing efforts to curtail inflationary pressure by means of tight fiscal and monetary policy have laid the basis for sustained annual average GDP growth rate in the 9.0 percent range for the period 1997 to 2000. In the first three quarters of 1997, GDP grew by 9.0 percent (year-over-year), consistent with the expected medium-term growth path. The near-term growth prospects for the APEC developing economies in Southeast Asia have been dampened by the recent exchange and financial market instability in some of these economies. However, as discussed below, the fundamentally bright long-term growth prospects for the region have not been altered. Growth in Thailand is expected to slow significantly in the short run but to recover subsequently to its longer-term trend. The Philippines, Indonesia and Malaysia, which have experienced spillover effects, are also likely to experience an economic slowdown in the near term. In the Western Hemisphere, Mexico has sustained its recovery from the downturn in 1995 with five consecutive quarters of strong growth through the second quarter of 1997. Real GDP is expected to grow by 6.5 percent for 1997 as a whole and to average 5 percent over the medium term, with strong export performance and a pickup in foreign capital inflows. In Chile, a rebound in growth to 5.8 percent in the second quarter of 1997 marked a turning point from the the slowing trend of 1996 which had continued into the first quarter of 1997 and reflected the increase in interest rates to address the risk of overheating. For 1997 as a whole, real GDP is expected to expand by 6 percent. Papua New Guinea also is on a firming trend with growth expected to increase to the 3 percent range in 1997 and 1998. In summary, APEC member economies vary as regards the stage of their business cycle. However, average growth for the region is expected to remain in the 3 percent range in 1997, albeit with a different mix than in 1996. Against a general background of low inflation and strengthening export growth (as discussed below), the APEC region as a whole has good prospects for sustained moderate growth in the medium term, with risks to this outlook primarily related to the working out of financial sector difficulties and/or the implementation of structural reforms in some member economies in Asia. Inflationary pressures continue to abate with a few setbacks due to shocks Inflation in the APEC region in 1996, as measured by the increase in consumer prices, slowed to 3.2 percent, back to the average of 1992-1994 and well below the 3.6 percent recorded in 1995. This reflected the more balanced economic growth within the region and tight financial policies. The easing of inflationary pressures has reduced the risk of overheating in the region, laying the basis for sustained expansion. In Japan and the United States, inflation in 1996 was held in check despite strengthening growth. In fact, Japan achieved a second consecutive year of price stability as inflation remained at almost zero; and, in the United States, price growth was held below 3 percent as a moderate tightening of monetary policy and a responsive labor market amongst other factors helped keep inflationary pressures less pronounced than at similar stages of previous cycles. In the other APEC developed economies, price growth was also broadly stable in 1996 and indeed inflation rates were somewhat below 1995 rates. In Canada, core inflation in 1996 was 1.5 percent, down from 2.2 percent in 1995. It is believed that Canada's output gap is sufficiently large to accommodate continued growth without igniting inflationary pressure. In Australia, inflation is also being held in check by the significant degree of slack that remains in product and labor markets. In New Zealand, firm monetary policies contributed to a moderation of price growth to 2.6 percent in 1996 from 2.9 percent the preceding year. Among the NIEs, inflationary pressures for the most part eased in 1996. Hong Kong, China managed a significant reduction in price growth from 8.7 percent in 1995 to 6 percent in 1996. Singapore and Chinese Taipei also recorded slowdowns in inflation of 0.3 and 0.6 percentage points, respectively. Korea experienced a modest increase in price growth of 0.4 percentage points to 4.9 percent, reflecting both wage pressures and high import prices due to the depreciation of the currency. Among the APEC developing economies, the pattern of stable or decelerating inflation rates was also in evidence in 1996. Brunei Darussalam recorded the lowest inflation rate within this group in 1996 at only 2 percent, down from 6 percent in 1995. Malaysia successfully curtailed inflationary pressures and the CPI remained in the mid-3 percent range, as in 1995. Five of these economies -- Chile, China, Indonesia, the Philippines and Thailand -- registered inflation rates in the 5 to 8 percent range. The Philippines and Thailand registered a marginal increase while the others witnessed significant deceleration in inflationary pressures. China, after three years of double-digit inflation, successfully managed a soft landing in 1996. The retail price index rose only 6.1 percent in 1996, sharply down from the 14.8 percent recorded in 1995. The more broadly-based CPI mirrored this deceleration, falling to 8.3 percent in 1996 from 17.1 percent in 1995. Chile and Indonesia also effected substantial declines in inflation in 1996, by 1.6 and 2.1 percentage points, respectively. In the case of Chile, the inflation rate was the lowest in 36 years. Mexico and Papua New Guinea brought about declines in inflation over the course of 1996, although both remained in the double-digit range. In Mexico, the deceleration during 1996 brought the inflation rate down to 27.7 percent in December on a year-over-year basis, compared to the annual average for 1996 of 34.4 percent. In Papua New Guinea, the inflation rate fell to 11.6 percent in 1996 from 17.3 percent in the preceding year. Inflationary trends in 1997 continue to be broadly positive, although the impact of the currency instability will result in setbacks in some economies. In the United States, inflation has further receded in 1997 (indeed, wholesale prices fell through the first half of the year) and is expected to decline to the mid-2 percent range for the year as a whole. In Japan, the increase in the consumption tax on April 1, 1997, caused a spike in the CPI in that month which is expected to result in annual average inflation of 1.6 percent this year. Among the other developed economies, price performance in the first half of 1997 has been excellent. Australia, Canada and New Zealand all have seen price growth slow to a crawl and are likely to have inflation rates in the 1 percent range for the year as a whole. The NIEs have also improved their overall inflation performance through the first half of 1997. In Chinese Taipei, CPI growth fell sharply to the mid-1 percent range in the first half of 1997. Hong Kong, China along with Korea have had marginally lower inflation rates in the first half of 1997 than the pace recorded in 1996, while Singapore has had marginally higher rates so far this year. In the developing economies, the continued rapid deceleration of inflation in China represents a key development in 1997. The retail price index rose only 1.4 percent on a year-over-year basis in the first half of the year while the CPI slowed to 4.1 percent in the same period. The decelerating trend continued into the third quarter pointing to very good results for the year as a whole. Overall inflation performance in 1997 in the APEC developing economies in Southeast Asia will be strongly affected by the currency instability. In Indonesia, Malaysia, the Philippines and Thailand, inflation rates in the second half of 1997 will move higher under the impact of the depreciation of their currencies, offsetting the gains in reducing inflation that each of these economies made in the first half of the year. Chile and Mexico also sustained their trends towards lower inflation in the first half of 1997. CPI growth fell to 5.3 percent in Chile in the 12 months to June 1997 (compared to the 1996 annual average of 6.6 percent), while in Mexico year-over-year inflation was down to 20.3 percent in the second quarter of 1997 (compared to the 1996 annual average of 34.4 percent). Taken as a whole, inflation performance in the APEC region is expected to improve in 1997, with consumer prices in the region growing by only 2.9 percent, the best so far in the 1990s, down from 3.2 percent in 1996. The decelerating trend is projected to continue, on balance, in 1998, with price growth falling on average by a further 0.2 percentage points to only 2.7 percent. Sustained growth reduces unemployment The sustained expansion in the APEC region has been an important factor in improving conditions for job growth and reducing unemployment rates. In this respect, the labor market situation in the region has remained better than elsewhere, particularly continental Europe. For APEC as a whole, the average unemployment rate in 1996 fell to 3.8 percent, 0.2 percentage points lower than in the preceding year. As regards performance in individual member economies, employment conditions in the United States have been very dynamic, with the unemployment rate falling to 5.4 percent in 1996 and further to a 24-year low of 4.8 percent in May 1997. In Japan, signs of employment recovery have recently emerged, but the unemployment rate has remained in the mid-3 percent range, up from the 2 percent range of the first half of the 1990s. In the other APEC developed economies, performance has varied. In New Zealand, the unemployment rate fell rapidly from 10.6 percent in 1991 to 5.9 percent in 1996 before rising somewhat to the mid-6 percent range in the first quarter of 1997. In Australia, growth in employment slowed in 1996, and the unemployment rate remained largely unchanged in the mid-8 percent range. However, recent job vacancy data point to stronger employment growth in the near term. In Canada, the unemployment rate has stayed high in recent years despite sustained job growth, reflecting equally rapid increases in the labor force. However, 1997 has seen an improved situation with the unemployment rate falling to the 9 percent level in mid-year from 9.7 percent in 1996. As a group, the NIEs have maintained very low unemployment on a consistent basis. For these economies, wage moderation remains the greatest challenge in maintaining healthy labor market conditions. In 1996, Hong Kong, China along with Korea and Singapore maintained unemployment rates in the 2 to 3 percent range. In Chinese Taipei, employment growth slowed to 0.3 percent as the restructuring process continued in 1996. As a result, the unemployment rate rose to 2.6 percent, the highest in ten years. Among the developing economies, most were able to reduce their unemployment rates in 1996 compared to the previous year. These reductions ranged from a remarkable 2 percentage point reduction in Indonesia and 1 percentage point gains in Chile and the Philippines to more modest reductions in other economies. Although there is still a significant component of cyclical unemployment in some member economies, overall labor market conditions in the region can be expected to improve given the overall growth prospects for the region, provided wage moderation continues to be maintained. Current account imbalances persist In a dynamic and rapidly integrating region such as APEC, featuring economies at widely different stages of economic development and large and rapidly growing trade and investment flows, imbalances in current and capital accounts are to be expected. In 1996, 11 APEC member economies evidenced current account deficits while seven economies had surpluses. In total, the region had a net deficit approaching US$120 billion or about 0.75 percent of the total GDP of member economies. Amongst the individual member economies, eight had deficits exceeding 3 percent of GDP, including six above 4 percent of GDP. Amongst developed economies in the APEC region, only two of the five had current account surpluses in 1996. Japan has consistently had a current account surplus, although this has been declining as a share of GDP since 1993 due to ongoing structural adjustment and the strength of the yen. In 1996, Japan’s current account surplus fell to 1.4 percent of GDP. However, Canada's current account has significantly improved since 1993, as the balance has shifted from a deficit of almost 4 percent of GDP in 1993 to a surplus of 0.5 percent of GDP in 1996. Trends among the other developed economies were mixed. The United States had a deficit of 1.9 percent of GDP in 1996, a position which has been maintained since 1994 and which has continued in the first half of 1997. Given the size of the U.S. economy, this translated into a deficit of approximately US$145 billion in 1996 which was the largest in absolute terms within the APEC region. Australia narrowed its current account deficit in 1996 to 3.8 percent of GDP from 5.3 percent in 1995, thanks to a strengthening of agricultural exports from the drought-related lower levels of the preceding year. New Zealand, however, saw a marginal widening of its deficit. In contrast to some broad similarities that the NIEs exhibit in terms of growth and inflation, there is no common pattern in terms of current account performance. Singapore and Chinese Taipei have maintained consistent surpluses while Korea and Hong Kong, China have tended to have deficits. Singapore's surplus fell marginally in 1996 to 15 percent of GDP from 16.9 percent recorded in 1995. Chinese Taipei, however, increased its current account surplus to 3.8 percent of GDP as falling imports more than offset low export growth. The current account position of Korea deteriorated during 1995 and 1996, reaching a deficit of 4.9 percent of GDP in 1996 from 2 percent of GDP in 1995. By contrast, Hong Kong, China reduced its deficit from 3.6 percent of GDP in 1995 to only 1 percent in 1996. Amongst the APEC developing economies, rapid economic growth in recent years has tended to widen external deficits. In 1996, the current account deficit of Thailand was 8.0 percent of GDP while Malaysia and Philippines were at 4.9 percent and 4.3 percent, respectively. Indonesia followed with a deficit of 4 percent of GDP. As discussed below, large current account deficits were linked to the financial market pressures experienced by some member economies. Mexico, which had effected a major reduction in its current account deficit in 1995 as a result of the recession and the peso devaluation, maintained the deficit at a very low level of 0.6 percent of GDP in 1996. In 1997, the deficit is expected to widen somewhat as import growth accelerated to over 20 percent year-over-year in the first quarter of 1997 in response to the strong domestic economic expansion, while export growth moderated to 16 percent year-over-year in the same period. Chile experienced a deficit in 1996, compared with a surplus in 1995, due to the fall of international prices of copper and cellulose, two major export items. The current account position of Chile is expected to improve in 1997. Intra-regional trade and investment flows continue to rise Rapid trade growth of APEC member economies has raised its share of world trade from 43.4 percent in 1986 to 50.6 percent in 1996, a gain of more than 7 percent. In 1996, however, notwithstanding the overall acceleration of growth in the APEC region, export growth slowed sharply to 4.6 percent in terms of total exports of member economies. One factor was last year’s semiconductor price slump, which led to a sharp terms-of-trade deterioration for many APEC member economies. Rapid APEC-wide growth in trade over the past decade could not have been achieved without a sharp increase in trade within the region itself. In fact, between 1986 and 1996, the share of trade of APEC economies with other APEC partners, or the "dependency ratio," increased from 68.8 percent to 71.6 percent for exports, and from 68.3 percent to 73.2 percent for imports. Table 8 shows that, in 1996, the share of intra-regional trade exceeded 60 percent for all APEC economies except Chile. The increased dependency ratio indicates that economic linkages among member economies have deepened over this period. In particular, as economic integration within the various sub-regional groups within APEC intensified, the region was able to take better advantage of vertical and horizontal linkages. In terms of the balance of trade, APEC economies as a whole recorded a trade deficit of US$110 billion in 1996, a sharp deterioration from the US$83 billion deficit in 1995. Seven member economies have tended to have persistent trade deficits. The United States; Hong Kong, China; Singapore; and Thailand have recorded trade deficits in each of the past five years. Korea, the Philippines and Australia have also tended to run trade deficits. On the other hand, Canada, China, Japan, Chinese Taipei, Brunei Darussalam, Indonesia and New Zealand have tended to show consistent trade surpluses. The United States’ trade deficit as a share of GDP has remained at around 1.5 percent for the last several years. However, reflecting the size of its economy, the trade deficit is the largest in the region in absolute terms. Meanwhile, Japan has consistently run the largest trade surplus in the region, and indeed in the world. As trade and investment liberalization and facilitation have advanced, investment flows among APEC member economies have also grown rapidly. Inflow of foreign direct investment (FDI) has been an important factor for the developing economies in the APEC region to sustain their economic development; continuous efforts have been made by most APEC member economies to attract foreign capital. The APEC region witnessed large flows of FDI in 1996 (see Table 11 for a complete breakdown). A number of developments are particularly noteworthy. China continued to be a major destination, attracting US$41.8 billion in 1996, up 11.2 percent from the previous year. Korea also saw a significant increase as inflows rose 68 percent to US$3.2 billion in 1996 from US$1.9 billion in 1995. Korea also continued to be an important source of FDI, with flows directed in particular to the United States and Southeast Asia, among others. Chile also saw a major surge of inflows in 1996 as FDI rose to US$6.2 billion, a 42.4 percent increase from 1995. Of this investment, 51 percent took place in the service sector. 2. Key Issues and Challenges Facing APEC Member Economies Current account deficits and financial market instability in mid-1997 Sizable current account deficits have characterized a number of APEC economies in recent years. In principle, such a situation need not be a problem, particularly in economies that are growing rapidly. If the capital inflows needed to finance the deficit are in fact underwriting an expansion in the productive capacity of the economy, the current account deficit need not be associated with an increase in the difficulty of servicing foreign debt. This is particularly true if the capital flows are long-term in nature. However, if the deficit in current transactions represents unproductive investments or consumption, the consequent build-up in foreign debt can create problems for the economy. These problems can be exacerbated if the debts are predominately short-term in nature, as creditors become unwilling to roll over the loans, as was the case in the Mexican peso crisis of 1994-1995. Moreover, if the banking sector is under stress or if prudential supervision is weak, problems for the domestic economy can also be made worse. In these cases, a period of consolidation and slower growth may be necessary to restore stability. The recent exchange and equity market instability in some Southeast Asian economies has dampened growth prospects in the near term. A number of Southeast Asian economies that had maintained fixed or managed-floating exchange rates -- usually relative to a (sometimes unpublished) basket of currencies -- moved to a much more flexible exchange rate system. Weaknesses in many of the currencies in the region have been accompanied by volatility and large declines in most regional stock markets. This instability originated in Thailand, where in recent years a currency peg resulted in increasingly distorted incentives for capital flows. For the decade leading up to 1993, the Thai economy, aided by a strong record of prudent macroeconomic policies, enjoyed robust growth. In the period after 1993, however, growth in aggregate demand was too strong to be sustained, as evidenced by widening current account deficits and growing inflation pressures. Excessive capital inflows, which exacerbated demand pressures, were also encouraged by the high domestic interest rates needed to defend the pegged exchange rate and combat overheating pressures. The capital inflows led to a growing burden of international indebtedness, much of which was short-term. At the same time, there was excessive exposure to the property sector and a lack of appreciation that large and unhedged foreign currency liabilities posed significant risk if the exchange rate regime were to change. These factors, combined with a rise in the value of the U.S. dollar against the Japanese yen, a sharp slowing in Thailand’s export growth, a sharp fall in the stock market, and political uncertainty, led to growing market sentiment that Thailand’s currency peg was unsustainable. This expectation then became self-fulfilling as domestic participants moved to hedge uncovered exposures and as speculators sold the baht short. This uncertainty then spread to several neighboring economies, notably Indonesia, Malaysia, and the Philippines. In periods of currency instability, such spillovers generally operate through two channels, both of which have probably been at play in the current episode. First, economies in the region are closely linked. Changes in growth and exchange rate prospects in one economy will naturally tend to have repercussions for other economies in the region. Second, in periods of instability, investors tend to look at economies whose economic situation appears to be similar to that in the economy where the instability first emerged. Thus, economies with large current account deficits and significant growth in property investment seem to have been particularly vulnerable to speculative attacks. Moreover, in periods of uncertainty speculative pressures can exacerbate instability and lead to overshooting behavior. In the recent episode, such pressures have doubtless contributed to the volatility in foreign exchange and equity markets. The process of arresting and recovering from a period of instability can be speeded by the adoption of policies to address the underlying causes. In the case of the Mexican peso crisis in 1994-1995, for example, growth resumed and Mexican authorities were able once again to attract funds in private capital markets within months of having undertaken comprehensive policy reforms to address the crisis. In the current episode, full implementation by the Thai government of the policy and financial reforms agreed to in connection with the Stand-By Arrangement negotiated with the IMF will go a long way toward restoring confidence. In looking at the present episode, a number of considerations should be borne in mind. First and most important, the current period of stability does not alter the fundamentally bright long-term growth prospects for the region. Indeed, to the extent that the currency turbulence has contributed to the resolution of unsustainable policy mixes and currency misalignments in the region, it may have even enhanced longer-term prospects, provided economies do not allow the recent depreciation to lead to a ratcheting up of inflation rates. Second, while speculative behavior may have aggravated the instability, at its heart the recent crisis reflected the response of markets to macroeconomic imbalances and policy deficiencies. It therefore underscores the importance of sound macroeconomic policies. Third, there is clearly a need to strengthen financial sectors in the APEC region with increased reliance on markets and enhanced prudential and regulatory arrangements. The slowdown in economic growth, falling asset prices and declining profitability have increased the number of non-performing loans – the origins of which stem from over- investment in property markets and lax lending practices in the financial sector. In many instances, banks assumed more credit, exchange rate, interest rate and other market risks than was prudent. Fourth, the spillover effects that have accompanied the current crisis illustrate both the increased economic interdependence in the region and the desirability of a high degree of transparency regarding economic and financial policies to enable markets to differentiate between economies and their respective prospects. Structural reform and deregulation for sustained higher growth Despite the strong record of sustained growth in the APEC region, questions have arisen concerning the region’s long-term growth prospects and the ability of individual economies to realize their long-term potential. In particular, questions have been raised as to whether APEC member economies can meet the challenges that many continue to face in areas such as external imbalances, underdeveloped financial markets, inadequate infrastructure and shortages of skilled workers. Moreover, questions surround the ability of firms that have long enjoyed protection to cope with the challenges of increased competition as APEC's market-opening measures are implemented. It is generally agreed that, to cope with all these challenges in a context of rapidly changing conditions created by increased international competition and sustained technological change, economies need continually to improve and adapt economic and social structures. APEC member economies are undertaking reforms along these lines, including market deregulation, opening up of trade and capital markets, and reducing the size of the government sector through expenditure cuts and privatization (See Box for details). If reforms and deregulation measures such as these are successfully implemented, APEC's prospects for achieving the vision created at Bogor will be considerably enhanced. However, as discussed above, the pace of reforms may need to be accelerated to maintain the confidence of markets. In this respect, strengthening of economic and technical cooperation in areas such as human resource development and small and medium-sized enterprises to build capacities of member economies to implement reforms can contribute significantly to the improvement of economic fundamentals that is needed to pre-empt future instances of instability. Recent Structural Reforms Undertaken by Member Economies Australia: In 1996, the Australian Government announced and conducted a major review into the Australian financial system. The Financial System Inquiry was charged with providing a stocktake of financial deregulation, an analysis of the forces driving change and recommendations on the key issues in regulatory reform, in particular to promote a more efficient and cost-effective financial system, consistent with stability, prudence, integrity and fairness. Canada: The Federal Government has taken steps to ensure that the economic and fiscal conditions are in place for sustained growth and job creation. It has made major structural reforms to ensure labor market flexibility, to increase investments in technology and knowledge, and to improve market access to Canadian exports and investment. Substantial progress has been made on the deficit front, and inflation remains at low levels. Chile: Structural reforms include the improvement of the educational system, increasing involvement of private investment in physical infrastructure, liberalization and internationalization of the financial markets, and the strengthening of trade and financial relations with the rest of the world through free trade agreements. China: Reform of the state-owned enterprises (SOEs) is a key to supporting the on-going restructuring of China’s industrial sector. Reforms are oriented towards establishing a modern enterprise system, with clear ownership, clearly defined powers and responsibilities, separation of enterprise from administration (in particular by shifting social welfare responsibilities from the enterprise sector to the social security system), and the application of sound management principles. The reforms include increasing the number of cities allowed to experiment with bankruptcies and mergers from 58 in 1995 to 110 in 1997 and tripling the amount of funds used for clearing debts of bankrupt firms. Hong Kong, China: On July 1, 1997, Hong Kong became a Special Administrative Region of the People’s Republic of China and is now referred to within APEC as Hong Kong, China. The Basic Law provides for continuation of free, open and competitive markets that are not controlled by state planning or state direction; establishes economic autonomy in the important spheres of public finance, monetary and financial affairs, trade and investment; prescribes budgetary prudence and a low tax regime; and offers a commitment to Hong Kong, China’s continuing role as a center for international business. Indonesia: A deregulation package introduced in June 1996 included measures to reduce and eliminate import duties and surcharges, streamline import trading schemes, improve incentives for exporters in priority sectors, and simplify licensing procedures for domestic and foreign investment. A follow-up package in July 1997 covered six fields, namely (i) imports, (ii) exports, (iii) regional taxes and regional levies, (iv) non-tax state revenues, (v) capital investments, and (vi) monetary affairs. The prominent aspect is the continuing of import duty rates on 1,600 tariff headings, reducing the unweighted average tariff from 13 percent to 11.9 percent. More than half of the total tariff headings (62.5 percent) are now subject to duties of 10 percent or less. Japan: Steady implementation of deregulation measures is a prerequisite for sustaining mid- and long-term growth of the Japanese economy. The Government further revised its Deregulation Action Plan in March 1997. This plan contains comprehensive deregulation measures in the following major areas: (i) housing and land; (ii) information and telecommunications; (iii) distribution; (iv) standards, certifications and import procedures; (v) financial services, securities and insurance; (vi) energy; (vii) employment and labor; (viii) matters related to pollution, wastes, environmental protection, dangerous articles, disaster prevention and public safety; and (ix) education. Korea: With its accession to the OECD in 1996, the Government began to accelerate financial market reform. Short-term steps towards reform addressed the further deregulation of this sector and the consolidation of business lines for specialized lending-only financial firms. The improved efficiency of local financial firms alone is expected to lower interest rates. The mid- and long-term measures emphasized making local financial firms larger and promoting specialization in self-selected business areas, thus resulting in a reorganization of the domestic financial industry as a whole. Mexico: The Government has broadened its structural reform in key sectors of the economy. The Social Security reform, which consists of the transition from a publicly provided pay-as-you-go plan to a privately-managed and publicly-regulated defined- contribution system, has been undertaken. A comprehensive reform in tax administration, aimed at increasing its effectiveness through the creation of a new career stream in tax administration and implementation of new systems and procedures for collecting taxes, has been in effect since July 1997. Other relevant aspects of the structural reform include the opening up of long-distance telephone service to competition, new auctions in the radio spectrum, de-monopolization of the natural gas sector, and privatization of satellites, the railroad system, ports and airports. Papua New Guinea: A series of structural reforms were initiated under the Economic Recovery Program to re-establish fiscal and monetary stability and the basis for stable medium-term growth. The program included shifting to a market-determined floating exchange rate and market-determined interest rates, tightening banking sector prudential rules, commitments to fiscal discipline, and a variety of measures to enhance competitiveness and to restore business confidence. Measures were also taken to improve public services, especially in education, health and agriculture; upgrade economic infrastructure; and channel development resources to the rural sector. Philippines: Implementation of structural reforms continued in 1997. The average tariff has been reduced from 15.6 percent to 13.4 percent. The downstream oil industry has been fully deregulated, effective 8 February 1997. Restrictions on domestic borrowing of foreign firms have been lifted, effective 1 January 1997. Good progress has been made towards the passage of the third tranche of the comprehensive tax reform program (reform of the individual and corporate income tax systems) to broaden the tax base and remove areas of discretion. This follows the expanded value-added tax and reform of the excise tax system. Privatization efforts continue in the infrastructure area (through the Build Operate Transfer scheme and other similar schemes in the energy, road networks and other sectors) and in social sectors such as pension funds and education. Chinese Taipei: Economic liberalization has been accelerated under a comprehensive program to develop the economy as an Asia-Pacific regional operations center (APROC) which, as of June 1997, has involved passage of 39 bills and amendment of 87 regulations. Average tariffs have been reduced from 7.7 percent in 1985 to 3.6 percent in 1996 and non-tariff barriers substantially lowered. Capital market development has been advanced through step-by-step liberalization of interest rates and the establishment of off-shore banking units and a foreign currency call-loan market. Among other service sector measures, a new telecommunications law was enacted in 1996 to build an environment of fair competition and equal access to networks and services and to pave the way for the opening of the telecommunications market. Thailand: To stimulate economic development, Thailand‘s Eighth Plan, launched in 1997, calls for: (i) reducing the current account deficit as a percentage of GDP, (ii) controlling inflation, (iii) increasing household savings to at least 10 percent of GDP, (iv) reducing the percentage of the population below the defined poverty level to less than 10 percent, (v) improving the development of human resources and the quality of life, (vi) utilizing, preserving and rehabilitating the natural environment, and (vii) increasing the quantity and quality of basic infrastructure in rural areas. United States: A major Government policy goal is the long-term stability and growth of the economy. This goal informs numerous areas of policy, including education, health care, social welfare and poverty alleviation, deregulation, and research and development. To increase the returns to employment for working families of modest means and help combat increased income inequality and persisting poverty, the Earned Income Tax Credit has been expanded and the minimum wage raised. As well, the Welfare Reform Act of 1996 replaced the Aid to Families with Dependent Children entitlement program with a block grant to the states fixed at $16.4 billion per year for fiscal years 1996-2001. The Act sets up time limits for welfare assistance: families on the rolls for five cumulative years become ineligible for cash aid. It also requires that 50 percent of the welfare caseload be working or in work-related activities by 2002. Table 1 (percent change per annum, except as indicated)
1. Historical data for individual economies for the period 1991-1996 were provided by member economies except those for Papua New Guinea, which are drawn from IMF and ADB sources. 2. Forecasts for 1997 and 1998 are from official sources where available on a calendar year basis. The exceptions are as follows: for Canada, Chile and Singapore the 1998 forecast is the average of the surveyed forecasts; for Japan and New Zealand, the 1997 and 1998 figures are drawn from the IMF, World Economic Outlook (September 1997), as the most recent calendar year forecasts available -- these cannot be directly compared to the official fiscal-year-based forecasts provided in the individual economy reports in this document. For Papua New Guinea, the forecast is based on IMF estimates as reported in the Asian Development Bank, Country Economic Review: Papua New Guinea (March 1997); for the USA, the 1997 and 1998 forecast figures are drawn from the IMF, World Economic Outlook (September 1997), as the most recent available. 3. Regional averages were calculated using 1994 nominal GDP levels as weights. For economies providing a range as the forecast, the mid-point was taken for the point estimates of regional growth. Table 2
1. Historical data for individual economies for the period 1991-1996 were provided by member economies except in the case of Papua New Guinea, where the figures are drawn from IMF and ADB sources. 2. Forecasts for 1997 and 1998 are from official sources where available on a calendar year basis. For Canada; China; Hong Kong, China; and Malaysia, the 1998 forecast is the average of the surveyed forecasts; for Mexico, New Zealand and Singapore, both 1997 and 1998 figures are averages of the surveyed forecasts (in Mexico’s case, the official projections are on a December-over-December basis, and hence not comparable to the figures on an annual average basis presented in this table); for Japan, the 1997 and 1998 figures are drawn from the IMF, World Economic Outlook (September 1997), as the most recent calendar year forecasts available -- these cannot be directly compared to the official fiscal-year-based forecasts provided in the individual economy reports in this document. For Papua New Guinea, the forecast is based on IMF estimates for year-end inflation as reported in the Asian Development Bank, Country Economic Review: Papua New Guinea (March 1997); for the USA, the 1997 and 1998 forecast figures are drawn from the IMF, World Economic Outlook (September 1997), as the most recent available. 3. Regional averages were calculated using 1994 nominal GDP levels as weights. For economies providing a range as the forecast, the mid-point was taken for the point estimates of regional growth. Unemployment Rates in APEC Member Economies (percent)
1. Figures for individual economies for the period 1991-1996 were provided by governments. 2. APEC total averages were derived using 1994 labor force as weights. Current Account Balances as a Share of GDP (1) (percent, except as indicated)
1. Percentage shares of GDP for 1991-1996 are provided by member economies. 2. 1996 estimate for Brunei is by the Economic Committee. 3. Balances in 1996 are as provided by member economies; in those cases where levels were not reported, figures cited are calculated consistent with reported shares of GDP and reported nominal GDP levels. 4. Papua New Guinea data are drawn from the individual economy report in section 3 of this chapter. Merchandise Trade Balances as a Share of GDP (1) (percent)
1. Data provided by member economies. 2. Papua New Guinea data are drawn from the individual economy report in section 3 of this chapter. Non-Merchandise Trade Balances as a Share of GDP (1) (percent)
1. Services trade balance plus net investment income and net transfers as a share of GDP; this table is derived as the current account balance as provided in Table 4 minus the merchandise trade balance as provided in Table 5. Growth of Exports and Imports in Real Terms: 1995-1996 (1) (percent change per annum)
1. Data provided by member economies. Shares of Intra-APEC Trade: 1993 and 1996 (percent)
Regional Shares of World Trade (percent)
Source: DRI. Note: Papua New Guinea and Brunei are excluded due to data availability. The "ASEAN 4" are Indonesia, Malaysia, the Philippines and Thailand. Gross External Debt as a Percentage of GNP
Source: World Debt Table, 1996. Note: Data for 1996 are from individual economies’ official publications | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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