Developing East Asia will expand 6.5 percent this year, slower than the 6.7 percent predicted in April. “The region is more inward oriented than others, and its growth is less dependent on global markets”, it said, adding, “With the exception of Pakistan, the share of exports to China is low, meaning that the region is not directly vulnerable to the Chinese economic slowdown”.
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“Growth in developing East Asia Pacific continues to be solid, but the moderating trend suggests policy makers in the region must remain focused on structural reforms that lay the foundation for sustainable, long-term and inclusive growth”.
The World Bank on Monday trimmed its growth forecast for developing East Asian economies – reflecting risks from China’s slowdown and a looming rise in the United States interest rate.
While the momentum was initially supported by private consumption, it has more recently benefited from a pick-up in investments that rose to 4.6 per cent in 2014-15 and 4.9 per cent in the first quarter of current fiscal, when compared to an average of a mere 1.3 per cent in the preceding two years.
The East Asia region is expected to grow 6.5% in 2015, moderating from 6.8% a year ago, it said.
Axel van Trotsenburg, the bank’s regional vice president, said in a statement the reforms must include “regulatory improvements in finance, labour, and product markets, as well as measures that enhance transparency and accountability”. In Cambodia, lower agricultural output is hurting the economy, although growth will still be 6.9 percent this year. Commodity importers will maintain a stable – even robust – pace of growth.
While the millions of manufacturing jobs lost in America and Europe-to advance the fraud that Beijing’s economists had unlocked the secret of endless state managed growth-will not likely be regained, the USA economy-with its technological prowess and strong legal protections-should again emerge as the first choice for global investors. Of course, the flipside of this tremendous growth was that, by 2007, a few 300 million or more Chinese workers, many of them migrants from the impoverished interior, worked in and around the country’s vast coastal export empire.
“In the long term, significant reforms in the public financial management system are necessary to address limited absorptive capacity of the government in light of the growing fiscal space”. However, the bank warns that if the country’s growth rate dips further, it could adversely affect the economies of neighboring countries that heavily depend on China.
The report also assumes that a gradual increase in US interest rates will begin in the coming months. Revisions to national accounts, together with new comparable data on purchasing power around the world, also raise questions regarding the measurement of prices in the region.
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“We expect the PBoC to cut the bank reserve requirement ratio (RRR) by 50bp on four occasions in 2016, on top of base money injections, which in part will be used to sterilise capital outflows arising from slower economic growth and CNY depreciation expectations”. “The main drag is slowing property investment growth, which may turn negative and in turn drag fixed asset investment growth down to single-digit levels in 2016”, Zhao says in report published this morning.
