East Asian growth to accelerate as Chinese economy recovers - World Bank
The World Bank said growth in East Asia's emerging nations will accelerate next year as China's economy recovers, reducing the need for policy makers to cut interest rates.
Developing East Asia will probably expand 7.5 per cent in 2012 and 7.9 per cent in 2013, the global lender said in a report today, raising the forecast for this year from an October prediction of 7.2 per cent. The region is expected to account for about 40 per cent of global growth in 2012, it said.
"We see a bit of an uptick next year in part because of China's recovery that is going on already," Bert Hofman, the World Bank chief economist for East Asia and the Pacific, said. "We see most of the economies to be almost at full capacity, so further stimulus at this point wouldn't make much sense, it would just result in higher inflation."
The region still faces risks from Europe and the US, where spending cuts and tax increases are due to take effect in January if lawmakers do not resolve a fiscal policy dispute, the World Bank said, even as recent reports showed a global recovery may be gathering momentum. Asian nations have loosened fiscal or monetary policies this year to protect growth, with rate cuts in China and Thailand and higher spending by the Philippine president Benigno Aquino and the Malaysian prime minister Najib Razak.
"We are pretty much already at the bottom of the rate- cutting cycle for most of the region," said Enrico Tanuwidjaja, an economist at Royal Bank of Scotland Group in Singapore. "The dynamics of inflation and growth for East Asia don't warrant further easing."
The World Bank raised its growth prediction for emerging East Asia after third-quarter data showed government measures to support expansion in China gave "quite a boost" to the economy, and may continue to do so next year, Mr Hofman said. World trade has also improved since August, and the risks from Europe "are now considerably less than six months ago", he said.
"We expect quarter four also to be good and that then feeds into a very strong next year and that lifts the region up as a whole," he said in the interview. "Even outside China, domestic demand is driving growth in Indonesia, Malaysia, the Philippines, so there also growth is quite strong."
China's economy may grow 7.9 per cent in 2012, compared with 9.3 per cent in 2011, the World Bank said. Asia's largest economy may expand 8.4 per cent next year, and the country's slowdown "appears to now have bottomed out," it said. Growth in 2013 will be a result of a "combination of lagging effects of earlier monetary expansions, local government fiscal stimuli, accelerated approval of central investment projects, and an upswing in the business cycle," according to the report.
* Bloomberg News
Published: December 19, 2012 04:00 AM