Tue, Apr 08, 2014 - Page 15 News List

World Bank tempers China view

CALMING GIANT:The global development bank reined in its growth forecast for East Asia, saying that regional economies can expect steady growth in coming years


The World Bank trimmed its growth forecast for developing East Asia for this year, but said the region’s economies were likely to see steady growth in the next couple of years, helped by a reinvigoration of global growth and trade.

The Washington-based development bank expects the developing East Asia and Pacific region to grow 7.1 percent this year and next year, down from the 7.2 percent rate it had previously forecast for both years.

Growth in 2016 is also seen at 7.1 percent, staying slightly below the 2013 growth rate of 7.2 percent, according to the World Bank’s latest East Asia and Pacific Economic Update report issued on Monday.

“For East Asia, we believe that the drivers of growth are going to be increasingly from the external front, because of the recovery in advanced economies,” World Bank East Asia and Pacific chief economist Bert Hofman said.

In its report, the World Bank said improving global trade would offset anticipated headwinds from the tightening of global financial markets.

Emerging markets, including those in Asia, had been roiled by significant capital outflows from around May to September last year as investors began positioning for the US Federal Reserve to start tapering its monetary stimulus.

While financial markets in the East Asia Pacific region have shown a muted reaction to the Fed’s actual decision in December last year to begin scaling back its quantitative easing, the possibility of capital flow reversals remains a concern for developing countries in the region, the World Bank said.

The prospects for US policy rates to normalize will put upward pressure on interest rates and could trigger more sizeable capital outflows from weaker economies, as well as make debt management more difficult in countries where leverage has risen, the bank said.

“Vigilance on capital flows remains warranted,” Hofman said, although he added that most of the capital flows in East Asia were now from foreign direct investment rather than portfolio flows, making them less volatile than in the past.

The World Bank trimmed its growth forecast for China this year to 7.6 percent, from 7.7 percent previously. It kept next year’s growth forecast for China steady at 7.5 percent, down slightly from 7.7 percent actual growth last year.

The new outlook for this year reflected “the bumpy start to the year,” it said, saying that China’s industrial production and exports had been weak in January and February.

“While the growth rate of industrial production has slowed and exports contracted in the first two months of 2014, the trend is nevertheless strengthening, and we expect quarterly growth to rise at midyear as external demand from the high-income countries solidifies,” the World Bank said.

Among Southeast Asian economies, the biggest changes in the World Bank’s economic forecasts were for Thailand and Myanmar.

It cut its forecast for Thailand’s economic growth to 3 percent in 2014 and 4.5 percent in 2015, from its previous forecasts of 4.5 percent and 5 percent respectively.

The World Bank said a recovery in external demand would lift growth in Thailand compared with the 2.9 percent actual growth last year.

However, domestic demand in Thailand remains dampened because of the nation’s ongoing political unrest, which has affected tourism receipts, public investment and investor confidence, it said.

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