Thursday, October 21, 2010

World Bank Predicts Strong Regional Growth in East Asia

Oct. 21 – The World Bank had strong growth forecasts for East Asia in its recently released biannual report on the region, but cautioned against quickly rising currency values and asset prices.

With China leading the pack, regional growth should hit 8.9 percent this year, up from a previous forecast of 8.7 percent, the bank said. Last year’s expansion was 7.3 percent.

“China remains the regional leader with an expansion of 9.5 percent. For the first time in a decade, five other countries are projected to expand by 7 percent or more (Thailand, Malaysia, Laos, Mongolia, and Papua New Guinea),” the report said.

The World Bank said that rising currency values may have a negative impact on regional growth. East Asia’s recovery has attracted a huge inflow of capital that is pushing up the value of certain currencies which may hurt exports. Some governments have intervened in foreign exchange markets to slow the rise in value.

“So far, export growth has remained robust, but with continued real appreciation of East Asian currencies this growth could slow,” the bank said, adding that large capital inflows may also lead to the creation of asset bubbles.

“The return of large capital inflows to the region, combined with rising inflationary pressures and climbing asset prices, presents an emerging policy challenge and a growing risk to macroeconomic stability,” the bank warned.

According to the World Bank, China’s prospects “look bright,” but the country must reorient its economy from its export-oriented stance to sustain such growth in the future.

For other nations in the region, the World Bank had the following advice: “The middle‐income countries of the region need to increase investment, raise skills, and encourage innovation if they are to eventually attain high‐income status.”

The report includes forecasts on China, Indonesia, Malaysia, the Philippines, Thailand, Cambodia, Laos, Mongolia, Myanmar, Brunei, Papua New Guinea, Timor Leste, Vietnam, Hong Kong, South Korea, Singapore, Taiwan, the Solomon Islands and smaller Pacific island nations and is available for download at the World Bank’s web site here.

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