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International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper investigates the drivers of business investment in Australia, focusing on the non-mining sectors. The paper also identifies aggregate-level drivers for non-mining business investment by looking at long-term trends. It delves into firm-level investment behavior and assesses the role of credit availability and uncertainty in different types of firms. Long-term empirical and simulation-based analyses suggest that global factors such as rising policy uncertainty and weaker commodity prices have been key drivers of the slowdown, while in the short term, a renewed escalation in US–China trade tensions could spill over to investment and growth in Australia. Yet, domestic factors are also at play, including domestic policy uncertainty and financial constraints, especially for smaller and younger firms. The pace of product market reforms can also impact business investment. Australia can promote business investment by reducing domestic policy uncertainty, easing credit constraints for small- and medium-sized enterprises, incentivizing research and development, and continuing with product market and tax reforms.
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper on the Philippines explores export performance in the context of global trade tensions. Unlike many Asian countries, the Philippines’ exports of goods have remained stable through the ongoing period of global trade tensions. Its low participation in global trade as well as in global value chains relative-to-peers seems to explain why the Philippines has not yet been negatively impacted by the trade tensions. On the other hand, despite its close trade ties with the United States, the Philippines has not benefitted much from trade diversion originated from the US–China bilateral tariffs, unlike Vietnam and Mexico. Philippines’ exports have slightly increased in dollar terms since 2017, but they have remained broadly stable in GDP terms. The Philippines does not appear to have benefitted much from the US–China trade tensions, but it has performed better than many of its peers at the aggregate level. The comparative advantages of the Philippines in terms of exports reside in high tech industries, which constitute its main exports. The Philippines has a revealed comparative advantage in exporting from high technology industries. In sum, the disaggregated trade data evidence suggests that the Philippines was not able to scale-up its exports to the United States as much as Vietnam and Mexico in many high- to medium-tech goods included in the US tariff lists.
International Monetary Fund. Research Dept.

effects-both countries’ GDP by up to 2 and 0.6 percent, respectively, and global GDP by up to 0.8 percent in 2020 (see figure). Recent empirical work at the IMF complements the models and provides evidence that US-China trade tensions have negatively affected consumers as well as many producers in both countries. The tariffs have reduced trade between the United States and China, but the bilateral trade deficit remains broadly unchanged. While the impact on global growth is relatively modest at this time, the latest escalation could make a significant dent in

International Monetary Fund. Research Dept.
It has been two years since the trade tensions erupted and not only captured policymakers’ but also the research community’s attention. Research has quickly zoomed in on understanding trade war rhetoric, tariff implementation, and economic impacts. The first article in the December 2019 issue sheds light on the consequences of the recent trade barriers.
International Monetary Fund. Asia and Pacific Dept

This Selected Issues paper investigates the drivers of business investment in Australia, focusing on the non-mining sectors. The paper also identifies aggregate-level drivers for non-mining business investment by looking at long-term trends. It delves into firm-level investment behavior and assesses the role of credit availability and uncertainty in different types of firms. Long-term empirical and simulation-based analyses suggest that global factors such as rising policy uncertainty and weaker commodity prices have been key drivers of the slowdown, while in the short term, a renewed escalation in US–China trade tensions could spill over to investment and growth in Australia. Yet, domestic factors are also at play, including domestic policy uncertainty and financial constraints, especially for smaller and younger firms. The pace of product market reforms can also impact business investment. Australia can promote business investment by reducing domestic policy uncertainty, easing credit constraints for small- and medium-sized enterprises, incentivizing research and development, and continuing with product market and tax reforms.

International Monetary Fund. Research Dept.