According to a new World Bank report, growth in developing countries in East Asia and the Pacific has remained resilient and is expected to decline, albeit only moderately, over the 2016-18 period. This perspective is subject to high risks, and countries should continue to give priority to monetary and fiscal policies that reduce vulnerabilities and strengthen credibility, while at the same time strengthening structural reforms.
Growth in developing countries in East Asia is expected to decline from 6.5 per cent in 2015 to 6.3 per cent in 2016 and 6.2 per cent in the period 2017-18. The forecast reflects China’s gradual evolution towards slower and more sustainable growth, which is expected to be 6.7% in 2016 and 6.5% in 2017, compared to 6.9% in 2015.
“This is an important moment for developing countries in East Asia and the Pacific. This region accounted for almost two-fifths of global growth in 2015, more than double the combined contribution of all other developing regions, “said Victoria Kwakwa, incoming vice president for the World Bank for East Asia and the Pacific. “The region has benefited from diligent macroeconomic policies, including efforts to increase incomes in commodity-exporting countries. However, if growth is to continue in the difficult global situation, it will be necessary to continue progress with structural reforms. “
The report entitled Economic Update on East Asia and the Pacific analyzes the region’s growth prospects in a difficult context: slow growth in high-income countries, generalized deceleration in emerging markets, weak world trade, persistently commodity prices Low and increasingly volatile global financial markets.
Excluding China, developing countries in the region grew by 4.7% in 2015, and the pace of growth will rise slightly – to 4.8% in 2016 and to 4.9% in the period 2017-18 – boosted by the growth of the great economies of Southeast Asia. However, the prospects of different countries vary according to their respective trade and financial relationships with high-income economies and China, as well as their dependence on commodity exports.
Among the large developing economies in Southeast Asia, the Philippines and Viet Nam have the strongest growth prospects: both are expected to grow by over 6% by 2016. In Indonesia, growth forecast stands at 5.1% By 2016 and 5.3% by 2017, depending on the success of recent reforms and the implementation of an ambitious public investment program.
A number of small economies, such as the Lao People’s Democratic Republic, Mongolia and Papua New Guinea, will continue to be affected by low commodity prices and reduced external demand. Cambodia’s growth will be slightly below 7% in the 2016-18 period, due to lower prices for agricultural commodities, lower apparel exports and moderate growth in the tourism sector. In the Pacific island countries, growth is likely to remain subdued.
“Developing countries in East Asia and the Pacific face high risks, such as a weaker-than-expected recovery in high-income economies and a slower-than-expected deceleration in China. At the same time, policymakers have less room for maneuver in setting macroeconomic policies, “said Sudhir Shetty, chief economist at the World Bank for East Asia and the Pacific. “Countries must adopt monetary and fiscal policies that reduce their exposure to global and regional risks and continue to implement structural reforms that promote productivity and promote inclusive growth.”
Slower-than-expected global growth could dampen demand and slow growth in developing countries in East Asia and the Pacific, especially in commodity-exporting countries. The report calls for close monitoring of economic vulnerabilities, especially those linked to high levels of debt, price deflation and slowed growth in China, as well as high corporate and household debt in other major economies. In addition, the region must be prepared to deal with natural disasters, which pose a significant risk to the Pacific island countries.