World Bank Ups EAP Growth, Warns Risks

The World Bank said that there is a generally positive outlook in the EAP region

The World Bank said that although the outlook for East Asia and Pacific economic growth is generally optimistic, risks can still cloud the growth.

The developing East Asia and Pacific economies will witness softer growth this year and in 2018, according to the World Bank. However, the generally favorable outlook could be overshadowed by different risks such as protectionism and geopolitical tensions.

The World Bank predicts that the developing region, including the China, will see a 6.4 percent growth this year and 6.2 percent in 2018. In April, a previous forecast was released, showing a 6.2 percent growth this year and 6.1 percent growth in 2018.

“The economic outlook for the region remains positive and will benefit from an improved external environment as well as strong domestic demand,” the Washington-based lender stated in its latest East Asia and Pacific Update report.

For 2017, the World Bank put Malaysia and Thailand in the leading position among large ASEAN (Association of Southeast Asian Nations) countries, while smaller countries like Mongolia, Fiji, and Myanmar are expected to witness a modest rise in growth. Cambodia, Laos, and Timor-Leste’s growths are expected to soften from recent highs.

Global Trade Risks and other Forecasts

The optimistic outlook, although touted by the World Bank itself, faces a number of risks rooting from trade protectionism and economic nationalism. Another factor to consider is the feared escalation of the geopolitical tensions in different areas of the region.

In recent week, US president Donald Trump and North Korean leader Kim Jong-Un have exchanged hostile and harsh statements, thus rousing fears over a disastrous war between the two nations. These fears were further intensified after Pyonyang, the North Korean capital, conducted its sixth and most powerful nuclear test on September 3.

“Because of the region’s central role in global shipping and manufacturing supply chains, escalation of these tensions could disrupt global trade flows and economic activity,” said the World Bank.

Aside from the locked horns of US and Nokor, market volatility is also feared to hinder faster and more positive economic growth in the region. This could be accompanied by a “flight to safety” that spurs capital outflows.

The World Bank said it believes that the economy of China will grow 6.7 percent this year and 6.4 percent in 2018. The previous forecasts were 6.5 percent this year and 6.3 percent in 2018. The Asian giant’s economy is anticipated to be moderated during the period between 2018 and 2019 as its economy tries to rebalance away from investments and external demands toward domestic consumption.

Recently, US Commerce secretary Wilbur Ross met with Chinese officials to discuss concerns of protectionism and the fair treatment of American firms in China.

Several other countries in the Southeast Asia, such as Myanmar and the Philippines, have been given cut growth forecasts.

“Businesses in Myanmar appear to have delayed investments as they wait for the government’s economic agenda and become clearer,” the World Bank said.

The cut on Myanmar’s growth was by 0.5 percentage points for both 2017 and 2018.

“These projections do not factor in any longer-term impact on the ongoing insecurity of the Rakhine State, which if persists could have significant adverse effects by slowing foreign investments,” said the World Bank.

A Myanmar military crackdown in the Rakhine State has caused over half a million Ronghiya people to try to escape. The crackdown, which was launched in August, has been denounced by the United Nations and has been branded as “ethnic cleansing.”

Meanwhile, in the Philippines, economic growth prospects have been softened due to a delay in its infrastructure program plans.

Furthermore, the World Bank said that Malaysia’s growth is receiving a lift from higher investment and recovery in global trade, while Thailand’s growth forecasts have been upped due to increased recovery in exports and tourism.

Thailand’s junta has recently visited the White House to meet Trump and talked about trade ties between Washington and Bangkok.

BWorldFinance is your primary source of news in the financial market, technology, and more. Visit now and get the latest happenings on the market.

Leave a Reply