Economic Growth in East Asia
High Savings and Investment
Data and SourceDomestic savings and investment in the high-performance East Asian economies is significantly higher than in other economies. Savings rates for East Asian economies averaged about 35% of GDP, while the saving rate in Sub-Saharan Africa was 15%, in Latin-America and the Caribbean, 19%, and in the high-income economies, 20%.
The difference between domestic savings and investment is foreign capital outflow. The East Asian economies as a group are the only developing economies in which savings exceeds investment, making them net exporters of capital. However, sustained foreign capital flows for a given country typically do not exceed a few percentage points of GDP. Thus relatively high savings and investment in these East Asian economies are characteristcs that are closely linked.
Since 1960, both savings and investment increased markedly in the high-performance East Asian economies. Savings rates in the developing East Asian economies were lower than in Latin America in 1965, but by 1990 they exceeded Latin America's savings rates by almost 20 percentage points. Investment levels were about equal in Latin America and East Asia in 1965; by 1990 East Asia's investment rates were nearly double the average for Latin America.
Private investment in the high performance East Asian economies showed an earlier and larger rise relative to other economies than did public investment. In the 1970s private investment in these economies averaged about 7 percentage points higher than private investment in other low and middle income economies. The level of public investment, however, was similar in the two groups of economies. Fiscal contractions associated with macroeconomic adjustment in the early 1980s led to a fall in public investment in many low and middle income countries, but public investment rose in the high performance East Asian economies. Private investment remained significantly about private investment in other low and middle income countries throughout the 1980s, albeit with with a sharp contraction from 1984 to 1986. Public investment began to fall back toward the level of investment in other low and middle income countries in the late 1980s.
Economic Growth in East Asia