By Sondre Ulvund Solstad
Apr. 24 – Analysts at the World Bank have predicted a moderate acceleration in regional growth in Asia from 7.5 percent in 2012 (the highest of any world region) to 7.8 percent in 2013. The analysts believe a revival in global demand over the course of the next year will be the predominant contributing factor, as long as China’s re-accelerating growth and the high 2012 growth rates of other regional countries are maintained.
In the report published last week, the World Bank provided data on the current economic situation in East Asia and the Pacific, as well as predictions on key short and medium-term developments.
The overall growth rate of 7.5 percent last year represented a decrease from the 8.3 percent growth of 2011, as China dragged down the impressive average of other developing countries. The region nevertheless contributed around 40 percent of global growth in 2012, facilitated by strong domestic demand due to stimulus measures by governments, and the pickup of external demand in the second half of the year.
Overall, the developing countries in the region (excluding China) saw a 1.7 percentage point increase in growth rates, climbing from 4.5 percent growth in 2011 to 6.2 percent in 2012.
The middle-income nations in particular performed beyond analysts’ expectations, with the Philippines’ growth increasing from 3.9 percent in 2011 to 6.6 percent in 2012, and Thailand making a strong recovery from the devastating floods in 2011 with a 18.9 percent growth rate in 2012. Indonesia (6.2 percent growth) and Malaysia (5.6 percent growth) were also commended for their output as both showed their resilience to relatively low external demand.
China saw a deceleration from 9.3 to 7.8 percent yearly growth, yet analysts did not see this as a cause for concern, as the lower growth rates were attributed to rebalancing efforts and weak external demand.
Overall, 2012 was said to represent a successful ‘soft landing’ in the reordering of China’s economy, from one marked by over-dependence on investment to one increasingly driven by consumer demand (a continual transition widely regarded as important by domestic and international economists). In this regard, the World Bank analysts noted that real disposable income of urban households in China increased 9 percent last year, while the retail sales figures were even more impressive with a 10.4 percent year-on-year increase during the first two months of 2013.
The report predicted growth in China to accelerate in 2013 to 8.3 percent, exceeding the Chinese government’s official target of 7.5 percent by 0.8 percentage points.
Meanwhile, the other developing nations in the region were expected to grow at a lower rate this year, dropping 0.5 percentage points to 5.7 percent annual growth in 2013. The projected growth rates, however, are still well beyond the expected world average (2.4 percent) and slightly above the expected world average for developing countries (5.4 percent).
Several external factors were noted as influencing the future growth trajectory of the region, with developed nations’ policies facilitating continued economic development.
Japan’s growth-oriented policies were seen as likely to continue the depreciation of the yen, which, while representing a challenge to some advanced industries elsewhere (principally Korea), also has the potential to facilitate growth through increased use of regional supply chains in countries such as Thailand and the Philippines. Should the policies prove successful they will also spur growing demand among consumers in Japan, the region’s fourth largest export market.
The report also stressed that the situation in global financial markets had improved since last summer, as quantitative easing in the United States, agreements on regional banking institutions in the European Union, and the announcement of a higher inflation target in Japan all contributed to market confidence. The bounce-back in gross capital flows to developed countries last year was attributed to this development, with numbers indicating a 17 percent year-on-year increase.
The World Bank analysts advised that strong investment in infrastructure and the labor force would promote continued growth, as well as vigilance towards macroeconomic issues that could result from large capital inflows and rapid economic growth.
The countries predicted to grow at the most rapid rate are Mongolia (13.0 percent), China (8.3 percent), Timor Leste (10.4 percent), Laos (7.6 percent) and Cambodia (7 percent).
