Economic growth in East Asia was expected to slow to 7.2 per cent in 2012 from 8.2 per cent last year as China’s expansion slows and demand from developed countries wanes, the World Bank said on Monday.
Its latest outlook for the region was lower than the 7.6 per cent growth the international development lender predicted in May, but it forecast a rebound in 2013 with 7.6 per cent growth.
“Weaker demand for East Asia’s exports is slowing the regional economy, but compared to other parts of the world, it’s still growing strongly, and thriving domestic demand will enable the region’s economy to bounce back to 7.6 per cent next year,” said Pamela Cox, the World Bank’s vice-president for the region.
Economic troubles in developed countries have slowed their imports of Asia-made goods, so demand from the developing world would primarily drive growth in Asia, the Washington-based bank said.
Countries in the region that rely on exports should rebalance their economies by encouraging consumer spending, it advised.
China would see its growth fall from 9.3 per cent last year to 7.7 per cent this year because weak demand is cutting into its exports and investment is slowing, particularly because of government measures to deflate what was feared to be a real estate bubble, the World Bank said.
In May, it had predicted 8.2 per cent growth in 2012 for China.
Government stimulus programmes and a rebound in global trade would see China’s 2013 growth rise to 8.1 per cent, it said.
The bank cited some global developments that are positive for East Asia’s growth. The European Central Bank said it would defend the euro and buy the bonds of troubled eurozone countries, and the U.S. Federal Reserve has announced a new round of stimulus measures.
Risks for East Asia include a downturn in the eurozone, the World Bank said, but added that fears of food inflation have been reduced because of strong rice supplies.
“Policymakers in the East Asia and Pacific region will have to continue managing growth and reducing poverty in an environment that will remain volatile,” the bank said.
“Over the medium term, increases in productivity in East Asia and the Pacific, which is increasingly becoming a middle income region, will drive growth,” said Bert Hofman, the bank’s chief economist for the region.
“Continued structural reforms, improvements in the business climate and investments in infrastructure and education systems will become more important.” Spending in Thailand on its recovery from last year’s widespread flooding, which closed factories and affected global supply chains, has helped increase domestic demand in the region. It has also benefited from rising capital spending by the public and private sectors in Indonesia, Thailand and Malaysia, the World Bank said.
It forecast Indonesia’s economy would grow 6.1 per cent this year, Malaysia’s 4.8 per cent, the Philippines’ 5 per cent, Thailand’s 4.5 per cent, Vietnam’s 5.2 per cent, Cambodia’s 6.6 per cent, Myanmar’s 5.5 per cent, Mongolia’s 11.8 per cent and Laos’ 8.2 per cent.
The world economy would see growth of 2.3 per cent this year, down from 2.8 per cent last year, but it should expand to 2.6 per cent in 2013, the World Bank said.