Singapore: In a warning about volatile global markets that has implications also for India, the World Bank said on Monday that economic growth in the East Asia and Pacific region will ease, pulled down by weaker growth in China.
In its East Asia and Pacific Economic Update, the World Bank said growth in the region will be led by large Southeast Asian economies, though the outlooks for individual countries vary depending on their trade and financial relationships with developed economies and China, as well as their dependence on commodity exports.
Regional growth is forecast to slow from 6.5 percent in 2015 to 6.3 percent this year and 6.2 percent in 2017 and 2018, the bank said.
Philippines and Vietnam have the strongest growth prospects among Southeast Asian countries, with both expected to grow by more than 6 percent this year, the report added.
Overall economic growth in the East Asia and Pacific region, which excludes Japan, Australia and India but includes China, will ease to 6.3 percent this year, from 6.5 percent in 2015, and will slow further to 6.2 percent next year, the World Bank said.
On China, it said: “Continued implementation of reforms should support the continued rebalancing of domestic demand.”
“In particular, growth in investment and industrial output will moderate, reflecting measures to contain local government debt, reduce excess industrial capacity and reorient fiscal stimulus toward social sectors.”
However, with a weaker recovery in the developed world or a steeper slowdown in China, the region would be affected by “spillover effects” through trade and financial channels, it said.
“The region has benefited from careful macroeconomic policies, including efforts to boost revenue in commodity-exporting countries. But sustaining growth amid challenging global conditions will require continued progress on structural reforms,” said Victoria Kwakwa, the incoming regional vice president for East Asia and the Pacific at World Bank.
Estimates based on historical data show that a one-percentage-point decline in China’s growth could lower growth in Vietnam and Malaysia by 0.4 percentage points and Mongolia’s tally by 0.8 percentage points, the report said.
Asian nations need to pursue policies that reduce their exposure to global and regional risks and improve credibility and market confidence, especially in countries where growth has been sustained by commodity exports or borrowing, it added.