Growth forecasts trimmed for E. Asia and Pacific countries

World Bank cuts estimate to 6.3%, says outlook clouded by risks like China's prospects and commodity price falls

WASHINGTON • The World Bank trimmed its 2016 and 2017 economic growth forecasts for developing East Asia and Pacific countries, and said the outlook was clouded by risks such as uncertainty over China's growth prospects, financial market volatility and further falls in commodity prices.

The lender lowered its growth forecast for this year for developing East Asia and Pacific countries only marginally to 6.3 per cent from 6.4 per cent, it said in a report yesterday. Growth is set to ease from an estimated 6.5 per cent last year, it said.

While developing nations in East Asia - from Indonesia to China - have benefited from careful economic policies, global risks are considerable and threaten the region's outlook, the lender said.

Among these are a slowdown in high-income countries, the slump in exports and financial market volatility.

"Policymakers have less room to manoeuvre," the World Bank's East Asia and Pacific region chief economist Sudhir Shetty said in a statement. "Countries should adopt monetary and fiscal policies that reduce their exposure to global and regional risks, and continue with structural reforms to boost productivity and promote inclusive growth."

Possible risks include a weaker-than-expected recovery in the high-income economies, a faster-than-expected slowdown in China, as well as increases in financial market volatility that could cause monetary conditions to tighten and have adverse effects on the real economy, the bank said.

"In particular, vulnerabilities created by the interplay between high levels of indebtedness, price deflation, and slowing growth in China bear close monitoring, as do corporate and financial sector vulnerabilities across much of the region."

A further fall in commodity prices would have a negative impact on major commodity exporters and reduce the space for public spending and investment, the lender added.

Growth in Malaysia was likely to come in at 4.4 per cent this year and 4.5 per cent next year, down from 5.0 per cent last year, as weaker demand from China and low commodity prices constrain growth and public spending, the bank said.

Growth in Thailand was estimated at 2.5 per cent this year and 2.6 per cent next year, down from 2.8 per cent last year, with weaker external demand and policy uncertainty likely to weigh on private investment.

Indonesia is likely to see growth accelerate to 5.1 per cent this year and 5.3 per cent next year, from 4.8 per cent last year, despite low commodity prices and headwinds to external demand.

"However, this outlook is contingent on the implementation of an ambitious public investment programme, and the success of recent reforms to reduce red tape and uncertainty for private investors," the lender said, regarding Indonesia.

Growth is expected to firm in the Philippines to 6.4 per cent this year from 5.8 per cent last year, on the back of accelerated implementation of the existing pipeline of public-private partnership projects, and spending related to the May 2016 presidential election, the World Bank said.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on April 12, 2016, with the headline 'Growth forecasts trimmed for E. Asia and Pacific countries'. Print Edition | Subscribe