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Asian Development Outlook 2018 How Technology Affects Jobs Juzhong Zhuang Deputy Chief Economist Asian Development Bank April 2018 2
Key messages Developing Asia to continue solid growth at 6.0% in 2018 and 5.9% in 2019 amidst the strong external and domestic demand PRC moderating with greater focus on financial stability; India rebounding from temporary reform related setbacks Firming commodity prices and consumer demand push inflation to 2.9% in 2018 and 2019 still below 10-year average Key risks stem from escalating trade tensions, rising US interest rates, and accumulating domestic private debt New technologies are not likely to cause widespread job losses in Asia. But policy action is needed for workers to overcome challenges posed by technological advance and harness its full benefits 3
Developing Asia continues its solid growth GDP growth (%) 8 Developing Asia Developing Asia excluding NIEs 6 6,4 7,0 6,3 6,8 6,6 6,0 5,9 6,4 6,6 6,5 6,4 6,1 6,0 5,9 4 2013 2014 2015 2016 2017 2018 2019 forecast NIEs = newly industrialized economies of Hong Kong, China; Republic of Korea; Singapore; and Taipei,China Source: Asian Development Outlook database. 4
supported by robust growth in advanced economies GDP growth (%) 2016 Actual 2017 Actual 2018 ADO 2018 projection 2019 ADO 2018 projection Major industrial economies a 1.5 2.3 2.3 2.0 United States 1.5 2.3 2.7 2.3 Euro area 1.8 2.5 2.2 1.9 Japan 0.9 1.7 1.4 1.0 a Average growth rates are weighed by gross national income, Atlas method. Sources: US Department of Commerce, Bureau of Economic Analysis, http://www.bea.gov; Eurostat, http://epp.eurostat.ec.europa.eu; Economic and Social Research Institute of Japan, http://www.esri.cao.go.jp; Consensus Forecasts; Bloomberg; CEIC Data Company; Haver Analytics; World Bank, Global Commodity Markets, http://www.worldbank.org; ADB estimates. 5
Synchronized trade resurgence in 2017 Growth in nominal exports Myanmar Cambodia Nepal Brunei Darussalam Bangladesh Pakistan People's Rep. of China Hong Kong, China Sri Lanka Thailand Philippines Singapore India Taipei,China Malaysia Republic of Korea Indonesia Viet Nam Armenia Mongolia Georgia Kazakhstan Tajikistan Kyrgyz Republic Azerbaijan 2015 2016 2017-60 -30 0 30 60 % change year on year Tajikistan Myanmar Azerbaijan Brunei Darussalam Kyrgyz Republic Hong Kong, China Georgia India Sri Lanka Nepal Philippines Singapore Taipei,China Cambodia Thailand Indonesia Malaysia Bangladesh People's Rep. of China Kazakhstan Republic of Korea Viet Nam Pakistan Armenia Mongolia Note: For BRU, CAM, and MYA, 2017 refers to data as of November; and for KGZ, as of April. Sources: CEIC Data Company and Haver Analytics (accessed 3 March 2018). Growth in nominal imports 2015 2016 2017-60 -30 0 30 60 % change year on year 6
...to continue at a more modest pace Exports growth, selected economies Semiconductor shipments % change, yoy, 3mma 30 PRC IND NIEs ASEAN-5 $ billion 500 Asia % change, Others year on year Growth of IC and optoelectronics (right axis) 25 15 400 20 0 300 15 200 10-15 100 5-30 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Jan 2018 0 2017 2018 0 Source: CEIC Data Company (accessed 2 March 2018) Notes: ASEAN-5 is composed of Indonesia, Malaysia, the Philippines, Thailand and Viet Nam; NIEs are newly-industrialized economies composed of Hong Kong, China; Republic of Korea; Singapore; and Taipei,China IC = integrated circuits Notes: Forecasts are as of 28 November 2017. Numbers are rounded up. Source: World Semiconductor Trade Statistics (http:/www.wsts.org). 7
Domestic demand still the main growth driver Demand-side contributions to growth, selected economies, 2017 Percentage points 10 Total consumption Total investments Net exports GDP growth NIEs ASEAN-5 5 0-5 PRC IND HKG KOR SIN TAP INO MAL PHI THA VIE Notes: ASEAN = Association of Southeast Asian Nations; NIEs = newly industrialized economies; GDP = gross domestic product; HKG = Hong Kong, China; IND = India; INO = Indonesia; KOR = Republic of Korea; MAL = Malaysia; PHI = the Philippines; PRC = People s Republic of China; SIN = Singapore; TAP = Taipei,China; THA = Thailand. IND data refers to H1 FY2017. Components do not add up to total due to a statistical discrepancy. Sources: Haver Analytics and CEIC Data Company (accessed 2 March 2018); Asian Development Outlook database. 8
...and strong consumption set to continue Consumer confidence index, % change East Asia Southeast Asia Year-on-year change, % 24 People's Republic of China Hong Kong, China Republic of Korea Taipei,China Year-on-year change, % 30 Indonesia Malaysia Thailand Philippines (right scale) Percentage points 24 16 20 16 8 10 8 0 0 0-8 -10-8 -16 Jan 2016 Jul Jan 2017 Jul Jan-18-20 -16 Jan 2016 Jul Jan 2017 Jul Jan-18 Notes: Data for Hong Kong, China; Malaysia and Philippines are on a quarterly basis. For the Philippines, the index refers to consumer expectations, computed as the percentage of households that answered in the affirmative less the percentage of households that answered in the negative. A positive (negative) CEI indicates a favorable (unfavorable) view. Source: Haver Analytics; CEIC Data Company (accessed 20 March 2018). 9
2018 and 2019 should consolidate gains 2017 2018 2019 2017 2018 2019 Actual Forecast Actual Forecast East Asia 6.3 6.0 5.8 South Asia 6.4 7.0 7.2 China, People s Rep. of 6.9 6.6 6.4 Bangladesh 7.3 7.0 7.2 Hong Kong, China 3.8 3.2 3.0 India 6.6 7.3 7.6 Korea, Rep. of 3.1 3.0 2.9 Pakistan 5.3 5.6 5.1 Taipei,China 2.9 2.9 2.8 Central Asia 4.3 4.0 4.2 Southeast Asia 5.2 5.2 5.2 Azerbaijan 0.1 1.7 2.0 Indonesia 5.1 5.3 5.3 Kazakhstan 4.0 3.2 3.5 Malaysia 5.9 5.3 5.0 Philippines 6.7 6.8 6.9 The Pacific 2.2 2.2 3.0 Singapore 3.6 3.1 2.9 Fiji 3.9 3.6 3.3 Thailand 3.9 4.0 4.1 Papua New Guinea 2.2 1.8 2.7 Viet Nam 6.8 7.1 6.8 Developing Asia 6.1 6.0 5.9 Excluding NIEs 6.6 6.5 6.4 10
PRC growth will sustain moderation in favor of reforms Demand-side contributions to growth Percentage points 10 8 6 4 2 0 Net exports Investment Consumption Gross domestic product Growth will moderate over 2018 2019 Government priorities to improve quality of growth: 1 Heading off financial risks 2 Controlling environmental pollution 3 Targeted intervention to eliminate poverty -2 2013 2014 2015 2016 2017 2018 2019 forecast Sources: Bloomberg; Haver Analytics; and CEIC Data Company (accessed 19 February 2018). 11
India growth picks up as headwinds fade Manufacturing PMI Index 56 54 Consumer confidence (right axis) Demonetization GST rollout % change, year on year 6 3 Temporary effects from demonetization and GST rollout easing 52 50 0-3 Growth to accelerate in FY2018 and FY2019 48 46-6 -9 India forecast to be the fastest growing large economy 44-12 Jan2016 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 GST=goods and services tax, PMI=purchasing managers index 12
The pickup in global commodity prices... Brent crude prices Food price index $/barrrel 120 2010 = 100 120 100 80 Spot Annual average Baseline forecast 110 100 Monthly Annual average Baseline forecasts 60 40 90 20 2014 2015 2016 2017 2018 2019 80 2014 2015 2016 2017 2018 2019 Sources: Bloomberg; World Bank. Commodity Price Data (Pink Sheet). http://www.worldbank.org (accessed 16 March 2018). 13
...will give a modest boost to inflation Inflation (%) 5 Developing Asia 10-year average (2008-2017) 4 3,7 3.7 3 2 3,0 2,2 2,4 2,3 2,9 2,9 1 0 2013 2014 2015 2016 2017 2018 2019 Source: Asian Development Outlook database. forecast 14
Risks to the outlook are on the downside Escalation of trade tensions Limited impact of US tariffs so far Further US tariffs or responses to them could tip the balance Interest-rate induced capital flow shifts Baseline assumes rising path of US Fed interest rates A more aggressive stance could reverse Asia s capital flows Impact of rising private debt on growth Quality of debt should be pushed, need to closely monitor debt trends and build more efficient financial systems Improved fiscal and financial positions bolster developing Asia s resilience to shocks 15
Theme chapter: How Technology Affects Jobs 16
Technological advancement drives higher productivity, the foundation for better-paid jobs and economic growth 17
There are compelling reasons for optimism about developing Asia s job prospects 1. New technologies often automate only some tasks of a job. 2. Technical feasibility does not guarantee economic feasibility. 3. Rising income and demand. 4. New occupations and industries. 18
New technologies often involve automating specific tasks associated with a job, not the job in its entirety Note: Percentages refer to Frey and Osborne (2017) estimates on probability of automation. Framework is based on Acemoglu and Autor (2011). Source: Asian Development Outlook 2018: How Technology Affects Jobs. 19
Industrial robots are concentrated in capital intensive sectors where employment shares are relatively small Source: Asian Development Outlook 2018: How Technology Affects Jobs. 20
Rising demand offsets displacement driven by automation Decomposing the percentage change in employment, 2005-2015 Note: Developing Asia in the decomposition analysis includes Bangladesh, India, Indonesia, Malaysia, Mongolia, the People s Republic of China, the Philippines, the Republic of Korea, Sri Lanka, Taipei,China, Thailand, and Viet Nam. Sources: Decomposition result using ADB Multiregional Input Output Database (accessed 20 November 2017); Labor force surveys, various countries; World Input Output Database Socioeconomic Accounts (Timmer et al. 2015).
This countervailing force is at work across the region Manufacturing GVC = global value chain, PRC = People s Republic of China. Note: Developing Asia in the decomposition analysis includes Bangladesh, India, Indonesia, Malaysia, Mongolia, the People s Republic of China, the Philippines, the Republic of Korea, Sri Lanka, Taipei,China, Thailand, and Viet Nam. Source: ADB estimates using the ADB Multiregional Input Output Database (accessed 20 November 2017); Labor force surveys, various countries; World Input Output Database Socioeconomic Accounts (Timmer et al. 2015).
Technology leads to new occupations but these tend to be in non-routine cognitive category New job titles, various time periods Total No. of Job Titles (latest year) No. of New Job Titles Share of New Job Titles % refers to share of new job titles India 2004-2015 Malaysia 1998-2008 Philippines 1990-2012 3,600 120 3.33% 2,338 28 1.20% 3,698 42 1.14% Notes: The figures are based on a comparison of National Classification of Occupations (NCO) for each country. Source: Asian Development Outlook 2018: How Technology Affects Jobs 23
Wages grew more for non-routine cognitive workers, leaving low-skill workers behind US$ 100 Changes in average monthly wages, constant US dollar, various time periods* 80 60 40 20 0 Nonroutine cognitive Manual Nonroutine cognitive Manual Nonroutine cognitive Manual Nonroutine cognitive INDIA INDONESIA THAILAND VIET NAM Manual Note: *The time frames vary across countries, with Viet Nam the shortest (2007 2015), followed by Thailand (2000 2010), India (2000 2012), and Indonesia (2000 2014). Developing Asia refers to the five countries included in this analysis. Source: Asian Development Outlook 2018: How Technology Affects Jobs 24
Government has an important role to play in leveraging technological advances for inclusive growth The new industrial revolution and the role of government 25
Key messages Developing Asia to continue solid growth at 6.0% in 2018 and 5.9% in 2019 amidst the strong external and domestic demand PRC moderating with greater focus on financial stability; India rebounding from temporary reform related setbacks Firming commodity prices and consumer demand push inflation to 2.9% in 2018 and 2019 still below 10-year average Key risks stem from escalating trade tensions, rising US interest rates, and accumulating domestic private debt New technologies are not likely to cause widespread job losses in Asia. But policy action is needed for workers to overcome challenges posed by technological advance, and harness its full benefits 26
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