Sluggish exports will pull back economic growth this year in East Asia and the Pacific, but the growth rate will pick up by next year, the World Bank (WB) predicts.
The bank’s East Asia and Pacific Economic Data Monitor, released October 8, sees regional economic growth slowing down by a full percentage point from 8.2 percent in 2011 to 7.2 percent this year, before recovering to 7.6 percent in 2013. Growth in developed countries will remain modest, with recovery in the region to be driven mainly by strong domestic demand in developing countries.
“Weaker demand for East Asia’s exports is slowing the regional economy, but compared to other parts of the world, it’s still growing strongly, and thriving domestic demand will enable the region’s economy to bounce back to 7.6 percent next year,” said Pamela Cox, World Bank East Asia and Pacific Regional Vice President.
The new report says that weak exports and lower investment growth will cut down China’s GDP growth from 9.3 percent in 2011 to 7.7 percent this year. In 2013, however, China’s growth is expected to rebound to 8.1 percent as the impact of stimulus measures kicks in, supported further by an uptick in global trade.
“The East Asia and Pacific region’s share in the global economy has tripled in the last two decades, from 6 percent to almost 18 percent today, which underscores the critical importance of this region’s continued growth for the rest of the world,” said World Bank president Jim Yong Kim.
The report cites reconstruction spending in Thailand after last year’s floods as among the factors buttressing domestic demand in the region.
In addition, countries like Indonesia, Thailand, and Malaysia are currently enjoying a boom in spending by their governments and the private sector on capital goods.
The report notes that tensions in the euro zone have eased following the European Central Bank’s announcement to defend the euro in July and the launch of its bond-buying program that significantly calmed the markets.
Also, the recent announcements by the United States Federal Reserve regarding a new round of quantitative easing to help stimulate the American economy has helped revive the global equity markets.
However, the report says that considerable downside risks remain. A crisis in the euro zone will adversely affect the economies in the East Asia and Pacific mainly through trade and links to the financial sector.
“Over the medium-term, increases in productivity in the East Asia and the Pacific, which is increasingly becoming a middle income region, will drive growth,” said Bert Hofman, World Bank Chief Economist for East Asia and the Pacific.
Photo: Auswandern Malaysia
