Despite lackluster performance of the global economy, the World Bank lifted its growth projections for the economies of developing East Asia and Pacific as domestic demand helped the region to remain resilient.
The region is forecast to expand by 7.5 percent this year, before growing 7.9 percent in 2013, the lender said in its East Asia and Pacific Economic Update released Wednesday. The estimate for 2012 was lifted from 7.2 percent, and that for 2013 from 7.6 percent.
Gaining importance in the world economy, the East Asia and Pacific region is expected to contribute almost 40 percent of global growth in 2012, World Bank Chief Economist for East Asia and Pacific Bert Hofman said.
Further, the World Bank observed that receding inflation in most economies indicates that there is no immediate need for monetary policy tightening in the absence of major shocks.
Developing East Asia excluding China, is projected to grow 5.6 percent this year, faster than 4.4 percent in 2011. The group that covers Thailand, Indonesia, Malaysia, and the Philippines will boost the overall growth of the region excluding China to 5.7 percent in 2013 and then to 5.8 percent in 2014, the bank said.
At the same time, China's growth is projected to reach 7.9 percent this year, 1.4 percentage point lower than last year's 9.3 percent and the lowest growth rate since 1999, it said. But the latest 2012 growth outlook figure was bigger than the bank's 7.7 percent previous forecast.
Going forward, fiscal stimulus and faster implementation of large investment projects is expected to boost 2013 growth to 8.4 percent, compared to the 8.1 percent growth cited in the October report.
Again, China's economic expansion is forecast to witness some slowdown during 2014 to 8 percent due to the leveling of investment and slow labor force growth.
The lender drew attention to Myanmar as another bright spot in the region. Growth in Myanmar is expected at 5.5 percent this year, which is seen increasing to 6.3 percent in 2013. The Philippines is forecast to expand 6.2 percent next year, while Thailand and Malaysia are seen rising 5 percent each.
The bank noted considerable risks to the region's momentum from possible delays of reforms in the euro area, the "fiscal cliff" in the U.S. and a possible sharp decline in the growth of investments in China.
Renewed monetary expansion in the U.S., Japan and Eurozone could lead to capital flooding in East Asia, thereby causing asset bubbles and excessive credit growth.
"Appropriate exchange rate arrangements and capital market development could provide a cushion against undesirable effects of capital inflows, while macro-prudential measures could guard against excessive credit growth," Hofman said.
If a shock in growth were to occur, most economies could counter the impact by easing their fiscal policies, the report said.
In 2014, most economies in the region are expected to benefit from a mild recovery in advanced nations as well as continued strong domestic demand.
by RTT Staff Writer
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