Growth prospects for East Asia and Pacific remain strong but risks need attention, says World Bank

Growth in developing East Asia and Pacific (EAP) is expected to remain strong and reach 6.3 percent in 2018, according to the latest World Bank economic report on the region.

Prospects for a continued broad-based global recovery and robust domestic demand underpin this positive outlook. Still, emerging risks to stability and sustained growth require close attention, the report said.

The report underscores that even with favorable prospects, policy makers in the region will be well advised to recognize and address emerging challenges.

“Attending to the short-term risks associated with a faster-than-expected rise in interest rates in advanced economies and possible escalation of trade tensions will require tighter monetary policy and larger fiscal buffers. To raise growth in the longer term, boosting public and private investment, productivity growth, and human capital will be key,” the World Bank said in a statement.

“Robust growth has underpinned the region’s tremendous gains in reducing extreme poverty. To build on this success, and improve prospects for the large share of the population who remain economically insecure, will require sustaining growth over the longer term,” said Victoria Kwakwa, World Bank Vice President for East Asia and the Pacific.

“Policy makers need to focus on addressing risks to economic stability while taking steps to enhance longer-term growth potential,” she added.

After growing faster than anticipated in 2017, China is expected to slow moderately to 6.5 percent in 2018, the report said, adding that as its economy continues to rebalance away from investment and towards domestic consumption with policies that focus more on slowing credit expansion and improving the quality of growth.

Excluding China, growth in developing EAP is expected to remain stable in 2018 at 5.4 percent, reflecting continued robust domestic and external demand.

Growth in Indonesia and Thailand is expected to strengthen in 2018, with improved prospects for investment and private consumption.

In the Philippines, growth is likely to remain stable in 2018. In Malaysia and Vietnam, growth is expected to ease, as public investment moderates in the former and agricultural production stabilizes in the latter after rebounding in 2017.

Prospects for several of the smaller economies are generally favorable, in part due to higher commodity prices. In Myanmar, economic growth is projected to rise in 2018, although investment prospects could deteriorate with the ongoing developments in Rakhine State, the report said.

Mongolia’s higher growth is predicated also on continued macroeconomic stabilization. Papua New Guinea could experience a cyclical recovery as commodity prices rise, although the recent earthquake could hurt prospects. Growth in Cambodia is expected to pick up slightly, while Lao PDR will likely see stable growth, it added.

“While the region’s growth outlook is positive, there are challenges for policy makers in the short and medium term,” said Sudhir Shetty, World Bank Chief Economist for the East Asia and Pacific region.

“Addressing these challenges will require measures to dampen the possible impacts of a more rapid pace of monetary policy tightening in advanced economies as well as to enhance longer-term growth prospects in the face of policy uncertainty, particularly around global trade,” he added.

To address risks to macroeconomic stability, countries will need to consider tightening monetary policies and further strengthening macroprudential regulations. This will be particularly important in countries where high debt levels or rapid credit growth could exacerbate vulnerabilities in their financial sectors as interest rates are raised in advanced economies.

Uttara is a correspondent with Indoasiancommodities. You can write to her on uttara.malhotra@indoasiancommodities.in.

Share

Leave a Reply

Your email address will not be published. Required fields are marked *