THE thriving economies of East Asia may feel the pinch from the downturn being experienced by China and need to strengthen domestic demands to cushion slowing imports caused by weak rebound in the United States and the financial turmoil hammering Europe, the World Bank announced today.
East Asian economies’ overall growth should be reduced from 2011’s 8.1 percent to a currently-stable 7.5 percent, the World Bank stressed. The economies in focus are Southeast Asia, South Korea, and China. Japan is not included.
The World Bank emphasized that as outside demand could possibly remain sluggish, developing Pacific and East Asian nations must depend less on their exports and rather more on domestic output to keep growth strong.
Regional growth, excluding China, must become higher from 2011’s measly 4.2 percent to 5.1 percent, steered by a rebound from natural calamities by Thailand, the World Bank bared in its East-Asia & Pacific Economic Report.
Weak global demand
The fast growth of China stumbled to a 3-year low of eight percent in the first three months from its previous period’s 8.8 percent as a result of a sluggish worldwide demand and government rulings implemented to ease down bloating inflation.
A rise in manufacturing production last month fell to its lowest mark since the worldwide financial crisis four years ago, dashing hopes that the downturn has subsided.
The WB has kept its economic predictions for China at a steady pace at 8.1 percent and said the figure can soar to 8.5 percent next year. Some experts have cut down their forecasts, although to still strong levels of around 7 – 8 percent.
Commodity suppliers in most of Asia, like Indonesia which has gained from the boom in China, are particularly susceptible to a downturn which may “trigger a surprising fall” in prices of basic goods, the WB said.
The World Bank said that several other nations are exerting efforts to bring down their dependence on commercial trade but must exert more.
Bryce Quilin, World Bank report head author said that some nations will have to energize consumption in the households. He added that other nations can invest more in their economies by allocating more funds on infrastructure and other government projects.
Vulnerable to shocks
Meanwhile, economic officials in China reacted to the decline in worldwide demand in the third quarter of 2011 by changing course after two years of restricting investment and lending to ease inflation and drive its economy to a healthier condition.
Economic analysts expect China to tread more carefully after the country’s large stimulus program in response to the global recession of 2008 sparked further inflation as well as an extravagant infrastructure spending.
The top economic official of China, prime minister Wen Jiabao yesterday vowed to provide more priority to strengthening growth but offered no signs on what course of action the government will take.
Wen has promised more financial lending for medium and small enterprise but stressed that policies implemented to ease rising spending in the housing sector will remain in place.
The World Bank added that the East Asian region does not have enough solid firewall to protect against the shocks brought about by the deepening financial woes of Europe.