World Bank trims its 2015 growth fore­cast for East Asia

The China Post - - FRONT PAGE -

East Asia’s de­vel­op­ing economies led by China will grow slightly slower this year, with higher U.S. in­ter­est rates and an ap­pre­ci­at­ing U.S. dollar pos­ing fur­ther risks to the re­gion, the World Bank said Mon­day.

In its lat­est fore­casts for the re­gion, the bank said China’s econ­omy should ex­pand by 7.1 per­cent in 2015, slower than the 7.2 per­cent rate pro­jected in Oc­to­ber and down from last year’s 7.4 per­cent growth.

De­vel­op­ing East Asia should grow 6.7 per­cent, eas­ing from 6.9 per­cent in 2014, the World Bank added in the lat­est edi­tion of its East Asia Pa­cific Eco­nomic Up­date.

Un­der the bank’s def­i­ni­tion, De­vel­op­ing East Asia in­cludes 14 coun­tries.

“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 in a state­ment.

Slower growth in China is likely to tem­per the pos­i­tive ef­fects of lower oil prices and a re­cov­ery in de­vel­oped coun­tries, but the bank said economies should take ad­van­tage of the oil price fall to push through fis­cal re­forms aimed at rais­ing rev­enues such as cut­ting fuel sub­si­dies.

“In China, en­gi­neer­ing a grad­ual shift to a more sus­tain­able growth path will con­tinue to pose chal­lenges for pol­i­cy­mak­ers, given real sec­tor weak­nesses and fi­nan­cial sys­tem vul­ner­a­bil­i­ties,” the bank said, adding that re­forms “will de­press ac­tiv­ity in the short term.”

The bank slashed its fore­cast for growth in the Philip­pines to 6.5 per­cent this year from its Oc­to­ber es­ti­mate of 6.7 per­cent, but this is still higher than last year’s 6.1 per­cent ex­pan­sion.

In­done­sia Growth

For In­done­sia, 2015 growth is ex­pected to come in at 5.2 per­cent, slower than the bank’s pre­vi­ous es­ti­mate of 5.6 per­cent but still stronger than last year’s 5.0 per­cent ex­pan­sion.

Thai­land’s econ­omy is likely to mount a strong re­bound and grow at 3.5 per­cent this year from just 0.70 per­cent in 2014 as greater po­lit­i­cal sta­bil­ity perks up con­sumer spend­ing and in­vest­ments.

But the bank said growth for Malaysia -- Southeast Asia’s largest oil ex­porter -- will slow to 4.7 per­cent from 6.0 per­cent last year as the coun­try feels the pinch from de­pressed crude prices, while a goods and ser­vices tax im­ple­mented this month will af­fect con­sump­tion.

Malaysian growth will pick up to 5.0 per­cent in 2016, it said.

“East Asia Pa­cific has thrived de­spite an un­steady global re­cov­ery from the fi­nan­cial cri­sis, but many risks re­main for the re­gion both in the short and long run,” said the bank’s chief econ­o­mist Sud­hir Shetty.

Among the risks is a down­turn in the eu­ro­zone and Ja­pan, two of the re­gion’s top ex­port mar­kets, the bank said.

It also warned that higher U.S. in­ter­est rates and an ap­pre­ci­at­ing dollar “could raise bor­row­ing costs, gen­er­ate fi­nan­cial volatil­ity and re­duce cap­i­tal flows” to the re­gion.

The Fed­eral Re­serve is split on when to raise ul­tra-low U.S. in­ter­est rates, with tim­ing sce­nar­ios rang­ing from June this year to some­time in 2016, ac­cord­ing to min­utes of its last pol­icy meet­ing re­leased last week.

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