The World Bank cut its 2014-2016 growth forecasts for developing East Asia, noting that China was likely to slow due to policies aimed at putting the economy on a more sustainable footing, and it also cautioned of capital-flight risks to Indonesia.
Developing East Asia will grow by 6.9% this year and next, down from 7.2% in 2013, the report says. In China, growth will ease slightly to 7.4% this year and 7.2% in 2015, as the government seeks to put the economy on a more sustainable path with policies addressing financial vulnerabilities and structural constraints. Excluding China, growth in developing countries in the region is expected to bottom out at 4.8% this year, before rising to 5.3% in 2015, as exports rise and domestic economic reforms advance in the large Southeast Asian economies.
The report [pdf] revised the World Bank’s 2014 forecast for Malaysia to 5.7%, up from 4.9% in April, because of robust exports in the first half of the year. Cambodia is expected to grow at 7.2% in 2014, boosted by rising garment exports. Thailand is also expected to benefit from the global recovery, given its strong integration into global value chains - - if the respite in political unrest is sustained.
But in Indonesia, which still relies on exporting commodities, growth will drop to 5.2% this year from 5.8% in 2013, constrained by falling commodity prices, lower-than-expected government consumption and slower credit expansion.
A bright spot for the region’s economies: robust private consumption, supported by various factors such as election-related spending in Indonesia and a strong labour market in Malaysia.
In the Philippines, buoyant remittances pushed up private consumption, which accounts for more than half of the country’s overall growth, forecasted to be at 6.4% this year and 6.7% in 2015.
Economic growth in Myanmar, with recent institutional and policy reforms and international re-engagement, will be at 8.5% this year and next.