The World Bank raised its growth forecast for developing East Asia this year by almost a full percentage point to 8.7 percent yesterday, but said the region’s high-flying economies must make structural reforms to sustain their rapid expansion.
East Asia’s developing economies have recovered from the global crisis, driven by a robust China, export demand and government stimulus, the Washington-based bank said in a semiannual report. It said industrial output, exports and employment were largely back to pre-crisis levels.
But the bank said countries must implement reforms “with vigor” to keep the rally going over the next decade. It also warned that it may be too early for most countries to completely end fiscal stimulus measures.
“East Asia will face a different global economy over the medium term,” the report said. “Growth in developed countries will be slower than observed before the crisis.”
For China, reforms mean rebalancing the world’s third-biggest economy to reduce its reliance on exports and boost the service sector and private consumption, the World Bank said. It said China’s GDP is likely to grow by 9.5 percent this year.
China also needs a tighter monetary policy to control emerging risks such as inflation and a property bubble, the report said. Real estate prices were up 30 percent in February from a year earlier and continue to climb.
For middle-income countries such as Thailand and Vietnam, this means boosting investment in physical and human capital, the bank said. And low-income countries like Cambodia need to develop manufacturing prowess.
The World Bank says the region also needs to address deeper economic integration and tackle climate change.
“The region has enormous scope to move rapidly toward the green technology frontier,” said Ivailo Izvorski, lead economist and principal author of the World Bank report. “This will not only improve the livability and sustainability of East Asia’s ever growing cities, it will also give the region a competitive advantage in an industry poised for rapid global growth.”
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