World Bank cuts China, East Asia growth forecasts

GMT 11:26 2014 Monday ,06 October

Arab Today, arab today World Bank cuts China, East Asia growth forecasts

China's economy
Singapore - AFP

The World Bank on Monday trimmed its growth forecasts for developing East Asian economies this year and next, as China's economic expansion loses momentum and policymakers face tighter global monetary conditions.
Developing countries in East Asia and the Pacific are likely to see a growth of 6.9 percent this year and in 2015, slower than the 7.1 percent the bank had forecast in April, it said in an updated report.
China's economy is forecast to grow 7.4 percent this year and 7.2 percent next year, compared with 7.6 percent and 7.5 percent projected in April as the government addresses financial vulnerabilities and structural constraints. China's economy expanded 7.7 percent in 2013.
But the bank's chief Asia economist Suhdir Shetty said China's slowdown is unlikely to be "dramatic" enough to have a major impact on the region.
"China's slowdown is gradual.. It is slower but it's not the bottom falling out of China's growth," he told reporters in Singapore.
He also said that the link between the giant Chinese economy and the rest of Asia does not only involve demand,  which is expected to weaken due to the slowdown.
China's links also involve investments which could even increase to parts of Asia as Chinese companies venture out of the country, Shetty said.
Developing East Asian countries, excluding China, are expected to grow 4.8 percent this year and 5.3 percent in 2015 from 5.2 percent in 2013.
- 'Unchartered waters' -
Growth in Southeast Asia's five biggest economies -- Indonesia, Malaysia, the Philippines, Thailand and Vietnam -- is forecast to slow down to 4.5 percent this year from 5.0 percent in 2013, but is likely to pick up and expand 5.0 percent next year as demand for exports grow.
"The good news for the ASEAN Five is that there will be a period of rising demand for their exports," Shetty said, adding however that these countries must continue to implement structural reforms, invest in infrastructure and improve their investment climate in order to sustain growth.
Indonesia is expected to grow 5.2 percent this year and 5.6 percent next year from 5.8 percent in 2013.
Malaysia's growth is forecast to rise to 5.7 percent this year from 4.7 percent last year, before easing to 4.9 percent in 2015.
The Philippines is forecast to expand at 6.4 percent this year and 6.7 percent in 2015 from 7.2 percent in 2013.
Thailand is likely to grow 1.5 percent this year and 3.5 percent next year from 2.9 percent in 2013 as the political situation stabilises.
Vietnam is expected to grow 5.4 percent this year and 5.5 percent next year. It expanded 5.4 percent in 2013.
Shetty said a key risk for regional economies is a "disorderly" tightening of monetary policy in the United States, Europe and Japan which would lead to a steep rise in interest rates.
He said there was no reason to doubt that a tightening of monetary policy in the developed economies would be gradual, but there was also a risk that it could be abrupt.
"To be completely frank, these are unchartered waters... Yes, there is a possibility it will happen in a disorderly fashion and that's when there could be risks," he said.
Sharply higher interest rates could lead to a reduction in capital flows and affect countries which are dependent on them to finance their deficits, he said.
Higher rates could hurt the property markets in several countries, he added.

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