Published on October 11, 2014
The World Bank has scaled down its growth forecasts for developing East Asian economies this year as well as the next, primarily because China’s economic growth has slowed down and policymakers are facing grim global monetary conditions.
Developing nations in East Asia and the Pacific region are expected to witness a growth of 6.9 per cent in 2014-15, lower than the 7.1 per cent growth forecast made by the World Bank in April.
Chinese economy is likely to grow 7.4 per cent this year and 7.2 per cent in 2015, compared with the forecast of 7.6 per cent and 7.5 per cent made in April as the government attempts to address financial issues and structural constraints. However, experts believe that the economic slowdown in China is not likely to have a major impact on the region.
The slowdown is said to be gradual, also the link between the Chinese economy and the rest of Asia does not include demand, which will decline due to slowdown. This link also encompasses investments which could increase to parts of Asia as Chinese firms move out of the country. Apart from China, the other East Asian nations are said to grow 4.8 per cent in 2014 and 5.3 per cent in 2015 from 5.2 per cent in 2013.
The expansion of Southeast Asia’s five biggest economies- Indonesia, Malaysia, the Philippines, Thailand and Vietnam- is predicted to slow down to 4.5 per cent in 2014 from 5 per cent in 2013, but is expected to reach 5 per cent next year as demand for export grows. Despite the rise is demand for exports, these countries should implement structural reforms and invest in infrastructure.
Indonesia might grow 5.2 per cent this year and 5.6 per cent in 2015 from 5.8 per cent in 2013. Malaysia is expected to grow 5.7 per cent this year from 4.7 per cent in the previous year, before reaching 4.9 per cent in the next year.
The Philippines is forecast to grow at 6.4 per cent this year and 6.7 per cent in 2015 from 7.2 per cent in the previous year. Thailand is expected to expand 1.5 per cent this year and 3.5 percent in 2015 from 2.9 per cent in 2013. Vietnam is forecast to expand 5.4 per cent this year and 5.5 per cent in the next year from 5.4 per cent in 2013.
The tightening of monetary policies in the US, Europe and Japan, which will lead to increase in interest rates, has put the regional economies at risk. Higher interest rates will lead to reduced capital flows and impact nations that rely on them to finance their deficits. Increase in interest rates could also affect property markets in several countries.
