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World Bank Sees Slower Growth For Developing East Asia

Worldbank EconomicUpdate 041315

The World Bank forecast economic growth in developing countries in East Asia and Pacific to ease this year despite getting the benefits of weak oil prices and the continued recovery in developed economies.

In the East Asia Pacific Economic Update released Monday, the Washington-based lender said developing East Asia will grow 6.7 percent each in 2015 and 2016, slightly down from 6.9 percent in 2014. In October, the lender had projected 6.9 percent growth this year and 6.8 percent for 2016.

China's growth is expected to moderate to 7.1 percent in 2015 and to 7 percent in 2016. It reflects continued efforts to address financial vulnerabilities and gradual shift to a more sustainable path of growth. Earlier the bank had estimated 7.2 percent growth for 2015 and 7.1 percent next year.

Excluding China, growth in developing East Asia is projected to rise to 5.1 percent in 2015, largely driven by domestic demand. It is forecast to improve to 5.4 percent next year.

While low global oil prices will benefit most developing countries in East Asia, especially Cambodia, Laos, the Philippines, Thailand, and the Pacific island countries, net fuel exporters, including Malaysia and Papua New Guinea, will see slower growth and lower government revenues, the World Bank said.

Indonesia is expected to grow 5.2 percent in 2015 and 5.5 percent in 2016. At the same time, Malaysia's growth is forecast to ease to 4.7 percent this year before rising to 5 percent in 2016.

Thailand is set to see weaker growth, with GDP rising 3.5 percent in 2015 and 4 percent in 2016. Philippines is forecast to expand 6.5 percent in both 2015 and 2016.

"Despite slightly slower growth in East Asia, the region will still account for one-third of global growth, twice the combined contribution of all other developing regions," Axel van Trotsenburg, World Bank East Asia and Pacific Regional Vice President said.

East Asia and Pacific is set to maintain its growth performance, underpinned by the gradual strengthening of activity in high-income economies and the sustained fall in fuel prices, the bank observed.

Nonetheless, the bank cautioned that given the uncertainties facing the global economy, the outlook for the region is subject to significant risks.

A downturn in the euro area and Japan would affect export performance of Asia. Higher interest rates in the U.S. and the appreciation in the dollar together with monetary policy divergence across the advanced economies might raise borrowing costs.

In order to address these risks, improving fiscal policy is key, the bank added. The lender urged countries to expand and upgrade physical infrastructure and improve public access to higher education and health care.

Developing East Asia and Pacific comprises Cambodia, China, Indonesia, Lao People's Democratic Republic (PDR), Malaysia, Mongolia, Myanmar, Papua New Guinea, the Philippines, Thailand, Timor-Leste, Vietnam, and the Pacific Island Countries.

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