E.Asia, Pacific economies to slow


GROWTH in developing East Asia and Pacific economies is expected to slow from 6.3 per cent in 2018 to 5.8 per cent this year reflecting a broad-based decline in export growth and manufacturing activity.
This was according to a World Bank Group economic update released yesterday.
Lead economist for East Asia and Pacific Andrew Mason said the report also expected growth to slow from 5.7 and 5.6 per cent next year and the following year (2021) respectively.
Mason attributed this to weakening global demand, including from China, and heightened uncertainty around the ongoing US-China trade tensions that had led to a decline in exports and investment growth, testing the resilience of the region.
In the region excluding China, consumption growth remained steady, though slightly lower than the same period last year, supported by monetary and fiscal policies.
Growth in the smaller economies of the region, however, remained robust, reflecting country-specific circumstances including steady growth in the tourism, real estate, and extractive sectors.
East Asia and Pacific vice-president Victoria Kwakwa said that as growth slowed, so did the rate of poverty reduction.
“While companies are searching for ways to avoid tariffs, it will be difficult for countries in developing East Asia and the Pacific to replace China’s role in global value chains in the short-term due to inadequate infrastructure and small scales of production,” Mason said.
He said the report Weathering Growing Risk warned that downside risks to the region’s growth prospects had intensified.
It also stated that prolonged trade tensions between China and US would continue to hurt investment growth, given high levels of uncertainty.
“A faster-than-expected slowdown in China, the Euro area and the US, as well as a disorderly Brexit, could further weaken the external demand for the region’s exports,” it said.
“High and rising debt levels in some countries are also putting limits on their abilities to use fiscal and monetary policies to ease the impacts of the slowdown.
In addition, any abrupt changes in global financial conditions could translate into higher borrowing costs for the region, dampening credit growth and further weighing on private investment and economic growth in the region.
“To weather growing risks, the report recommends that countries with sufficient policy space use fiscal and/or monetary measures to help stimulate their economies, while guarding fiscal and debt sustainability.
“Countries in the region will also benefit from staying the course on trade openness and by deepening regional trade integration.”
The report also noted that the ongoing US-China trade dispute, along with slowing global growth, also increased the need for countries in the region to undertake reforms to improve their productivity and boost growth.
This includes regulatory reforms that improve the trade and investment climate to attract investment and facilitate the movement of goods, technology, and know-how.