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Summary Overall growth for East Asian economies should decline from last year, says WB.
East Asias developing economies could face a shock from Chinas slowdown and need to boost domestic demand to offset weak exports due to a sluggish U.S. recovery and Europes debt crisis, the World Bank said Wednesday.Overall growth for East Asian economies should decline from last years 8.2 percent to a still-robust 7.6 percent, the bank said. The group includes China, South Korea and Southeast Asia and excludes Japan.As external demand is likely to remain weak, countries in developing East Asia and Pacific need to rely less on exports and more on domestic demand to maintain high growth, the bank said.Excluding China, regional growth should accelerate from last years 4.3 percent to 5.2 percent, propelled by Thailands rebound from flooding, the bank said in its East Asia and Pacific Economic Update.Chinas rapid growth fell to a three-year low of 8.1 percent in the first quarter from the previous quarters 8.9 percent due to anemic global demand and government controls imposed to cool overheating and inflation. Growth in factory output in April plunged to its lowest level since the 2008 global crisis, jarring hopes the slowdown has bottomed out.The World Bank left its growth forecast for China unchanged at 8.2 percent and said that should rise to 8.6 percent in 2013. Some private sector analysts have trimmed their outlooks, though to still-healthy levels of about 8 to 9 percent.Asian commodities suppliers such as Indonesia that have benefited from Chinas boom are especially vulnerable to a slowdown, which could trigger an unexpected drop in commodity prices, the bank said.Many countries are trying to reduce reliance on trade but need to do more, the bank said.Some countries will need to stimulate household consumption, said the reports chief author, World Bank economist Bryce Quillin, in a statement. He said others can pump money into their economies through spending on building public works.In China, authorities responded to the slump in global demand late last year by reversing course after spending two years tightening lending and investment curbs to cool inflation and steer growth to a manageable level.Analysts expect Beijing to move cautiously after its huge stimulus in response to the 2008 crisis fueled inflation and a wasteful building boom.On Sunday, Premier Wen Jiabao, Chinas top economic official, promised to give more priority to boosting growth but gave no indication what Beijing might do. The government has promised more bank lending for small businesses but says controls imposed to cool surging housing costs will stay in place.The region also is vulnerable to shocks from Europes debt crisis, the World Bank said.It said the European Union, along with the United States and Japan, accounts for more than 40 percent of regional exports.Prospects for East Asia are, as in other developing regions, weighed down by the persistent tepid recovery of the U.S. and, most particularly, the uncertainty in Europe, the bank said.
