World Bank trims growth forecasts for East Asia
Print Edition
THE World Bank yesterday cut its growth forecasts for developing economies in East Asia and the Pacific but allayed fears of a hard landing for China’s slowing economy.
The bank said also that it expects any increase in interest rates in the United States to have an orderly impact, but warned of a risk that markets could react sharply, causing regional currencies to fall further.
In a report on 14 economies led by China, the bank called on them to mitigate the impact of the slowing Chinese economy and any increase in US rates by adopting “prudent macroeconomic management” and deeper structural reforms.
“The baseline growth projections for China assume a further gradual slowdown in 2016-17,” the bank said, playing down concerns that the world’s second-largest economy could slow down abruptly following stock market turmoil and a weaker manufacturing sector.
“China has sufficient policy buffers to address these risks and prevent a sharp slowdown,” it said.
In its updated outlook for the region, the bank said China’s gross domestic product is expected to grow by 6.9 percent this year, moderating to 6.7 percent next year and 6.5 percent in 2017. It rose 7.3 percent in 2014.
The forecasts were slightly lower than the bank’s projections in April.
For developing economies in the East Asia-Pacific region, average growth is forecast at 6.5 percent this year, 6.4 percent next year and 6.3 percent in 2017. This is down from 6.8 percent actual growth in 2014.
“This reflects mainly a moderate slowdown in China,” the bank said.
The 14-country forecast also includes Indonesia, Malaysia, the Philippines, Thailand, Vietnam, Cambodia, Laos, Myanmar, Mongolia, Fiji, Papua New Guinea, the Solomon Islands and East Timor.
Among the bigger Southeast Asian countries, the Philippines and Vietnam are expected to be the stronger performers as weak commodity prices hobble growth in oil exporters Indonesia and Malaysia.
The Philippine economy is forecast to grow by 5.8 percent this year, 6.4 percent next year and 6.2 percent in 2017, compared with 6.1 percent in 2014.
Vietnam’s GDP is forecast to accelerate from 6 percent growth in 2014 to 6.2 percent this year and 6.3 percent in each of the next two years.
In Malaysia, the economy is expected to grow by 4.7 percent this year and next, and by 5 percent in 2017, down sharply from 6 percent in 2014.
Indonesian growth should come in at 4.7 percent this year, 5.3 percent next year and 5.5 percent in 2017, compared to 5 percent in 2014.
The bank said it expects the US central bank to raise interest rates in the coming months, which could prompt capital to flow back into the US economy from emerging markets.
“While this increase has been anticipated and is likely to prove orderly, there is a risk that markets could overreact in the short term,” it said.
“The risks to global and regional growth, and to the cost and availability of external financing, call for a continued focus across the region on sound macroeconomic management and on mitigating external and fiscal vulnerabilities.”
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