Singapore: Growth in developing economies in East Asia is holding up despite tough global conditions and a slowdown in China, according to the World Bank.
The Washington-based lender lowered its growth forecast for this year for developing East Asia and Pacific countries only marginally to 6.3 per cent from 6.4 per cent, it said in a report on Monday. Growth is set to ease from an estimated 6.5 per cent in 2015, it said.
While developing nations in East Asia — from Indonesia to China — have benefited from careful economic policies, global risks are considerable and threaten the region’s outlook, the lender said. Among these are a slowdown in high-income countries, the slump in exports and financial market volatility.
"Policy makers have less room to maneuver,” Sudhir Shetty, chief economist of the World Bank’s East Asia and Pacific region, said in a statement. "Countries should adopt monetary and fiscal policies that reduce their exposure to global and regional risks, and continue with structural reforms to boost productivity and promote inclusive growth.”
For China, the World Bank is forecasting 6.7 per cent economic expansion this year, unchanged from its October estimate. Excluding China, the region’s economy is projected to grow 4.8 per cent this year, up from 4.7 per cent in 2015 and 0.1 percentage point lower than previously predicted.
China is slowly moving toward more sustainable growth with less reliance on industrial exports, Shetty told reporters via video from Washington. At the same time, the economy is creating a substantial number of jobs, partly because some manufacturers are moving production to other parts of China instead of lower-cost countries, he said.
"Many jobs are moving across China, away from the coastal areas,” he said. "The quality of infrastructure is orders of magnitude better than those in other countries, and it helps compensate for the higher wages.”
In Southeast Asia, the biggest downgrades in growth forecasts were for Indonesia and Malaysia, both commodity exporters. Indonesia’s estimate for 2016 was lowered by 0.2 percentage points to 5.1 per cent, while Malaysia’s was cut by 0.3 points to 4.4 per cent.
The largest forecast upgrade was for Thailand, with the World Bank now projecting expansion of 2.5 per cent this year, up from two per cent in the earlier report.
With developing nations in East Asia and the Pacific accounting for about 40 per cent of world growth in 2015, the global economy is too reliant on the region to drive demand, Shetty said.
"It’s not good to have a plane flying on one engine,” he said. "The global economy would be much better off with multiple sources of growth.” — Bloomberg News