The World Bank’s latest East Asia and Pacific Economic Update released today, projects the Asia region will grow at 7.5 percent in 2012, lower than the 8.3 percent registered in 2011, but set to recover to 7.9 percent in 2013.
With weak demand for exports from global markets, domestic demand has remained the main driver of growth for most economies of the region. The region’s economic performance in 2012, the report says, was affected by China’s economic slowdown.
China’s growth is projected to reach 7.9 percent in 2012, 1.4 percentage point lower than last year’s 9.3 percent and the lowest growth rate since 1999. Weak exports and the government’s efforts to cool down the overheating housing sector slowed down China’s economy in 2012, but recovery has set in the final months of the year. In 2013, China’s economy is expected to grow at 8.4 percent, fueled by fiscal stimulus and the faster implementation of large investment projects.
Asia contributed almost 40 percent of global growth in 2012, and should have a similar share in 2013.
World Bank projections –
China 2013 GDP Growth 8.4%
China 2014 GDP Growth 8.0%
Developing East Asia (excluding China) 2011 GDP growth 4.4% [Actual]
Developing East Asia (excluding China) 2012 GDP growth 5.6% [Estimate]
Developing East Asia (excluding China) 2012 GDP growth 5.7% [Projection]
Developing East Asia (excluding China) 2012 GDP growth 5.8% [Projection]
Continuing strong performances by Indonesia, Malaysia, and the Philippines will boost developing East Asia, excluding China.
There are considerable risks that could slow the region’s momentum, including possible delays of reforms in the Eurozone, the “fiscal cliff” in the US, and a possible sharp decline in the growth of investments in China.
If a shock in growth were to occur, most countries could counter the impact by easing their fiscal policies.
For economies in the region that face difficulties in budget execution, particularly of the capital budget, fiscal interventions could focus on increasing private domestic demand, such as targeted social assistance or investment tax credits.