Economic growth will ease slightly in developing countries in East Asia and Pacific this year, even as the region benefits from lower oil prices and a continued economic recovery in developed economies, says a World Bank report.
According to the Bank’s East Asia Pacific Economic Update, the developing economies of East Asia are projected to grow by 6.7 per cent in 2015 and 2016, slightly down from 6.9 per cent in 2014. China’s growth is expected to moderate to around 7 per cent in the next two years compared with 7.4 per cent in 2014. Growth in the rest of developing East Asia is expected to rise by half a percentage point, to 5.1 per cent this year, largely driven by domestic demand—thanks to upbeat consumer sentiment and falling oil prices—in the large Southeast Asian economies. Several smaller economies, especially commodity exporters such as Mongolia, will see lower growth.
“Despite slightly slower growth in East Asia, the region will still account for one-third of global growth, twice the combined contribution of all other developing regions,” said Axel van Trotsenburg, World Bank East Asia and Pacific regional vice president. “Lower oil prices will boost domestic demand in most countries in the region and provide policy makers a unique opportunity to push fiscal reforms that will raise revenues and reorient public spending toward infrastructure and other productive uses. These reforms can improve East Asia’s competitiveness and help the region retain its status as the world’s economic growth engine.”
Low global oil prices will benefit most developing countries in East Asia, especially Cambodia, Laos, the Philippines, Thailand, and the Pacific island countries. But the region’s net fuel exporters, including Malaysia and Papua New Guinea, will see slower growth and lower government revenues. In Indonesia, the net impact on growth will depend on how much a decline there will be for its coal and gas exports.
The headwinds facing the world economy continue to pose risks to East Asia’s globally-integrated economies. The recovery in high-income countries continues to be slow and uneven, and a downturn in the eurozone and Japan would weaken global trade. Higher US interest rates and an appreciating US dollar, along with diverging monetary policy paths across advanced economies, could raise borrowing costs, generate financial volatility and reduce capital flows to East Asia. The continued strengthening of the dollar against other major currencies also could hurt highly-dollarized economies such as Cambodia and Timor-Leste.
In most of the larger East Asian economies, efforts to bolster revenues and restructure spending can help fill the gap in infrastructure investments and create more funding for social protection and insurance programmes, which are already under pressure amid rapid aging in the region, the report says. The report said that in the major fuel exporting countries and Mongolia, fiscal consolidation is required. (SH)
Fibre2fashion News Desk - India