World Bank trims forecast

SINGAPORE 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% this year and in 2015, slower than the 7.1% the bank had forecast in April, it said in an updated report.
China’s economy is forecast to grow 7.4% this year and 7.2% next year, compared with 7.6% and 7.5% projected in April as the government addresses financial vulnerabilities and structural constraints. China’s economy expanded 7.7% in 2013.
inside no 10But 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% this year and 5.3% in 2015 from 5.2% in 2013.
Growth in Southeast Asia’s five biggest economies — Indonesia, Malaysia, the Philippines, Thailand and Vietnam — is forecast to slow down to 4.5% this year from 5.0% in 2013, but is likely to pick up and expand 5.0% next year as demand for exports grow.
inside no 10.2“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% this year and 5.6% next year from 5.8% in 2013.
Malaysia’s growth is forecast to rise to 5.7% this year from 4.7% last year, before easing to 4.9% in 2015.
The Philippines is forecast to expand at 6.4% this year and 6.7% in 2015 from 7.2% in 2013.
Thailand is likely to grow 1.5% this year and 3.5% next year from 2.9% in 2013 as the political situation stabilises.
Vietnam is expected to grow 5.4% this year and 5.5% next year. It expanded 5.4% 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.
inside no 10.1He 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.

sourced:ttrweekly.com