By THE NATION
Prospects for a sustained broad-based global recovery and robust domestic demand underpin this positive outlook. Still, emerging risks to stability and sustained growth require close attention.
“Enhancing Potential”, the April edition of the World Bank East Asia and Pacific Economic Update released yesterday, underscores that even with favourable prospects, policymakers in the region will be well advised to recognise and address emerging challenges.
Attending to the short-term risks associated with a faster-than-expected rise in interest rates in advanced economies and possible escalation of trade tensions will require tighter monetary policy and larger fiscal buffers. To raise growth in the longer term, boosting public and private investment, productivity growth, and human capital will be key.
After growing faster than anticipated in 2017, China is expected to slow moderately to 6.5 per cent in 2018 as its economy continues to rebalance away from investment and towards domestic consumption with policies that focus more on slowing credit expansion and improving the quality of growth.
Excluding China, growth in developing EAP is expected to remain stable in 2018 at 5.4 per cent, reflecting continued robust domestic and external demand. Growth in Indonesia and Thailand is expected to strengthen in 2018, with improved prospects for investment and private consumption. In the Philippines, growth is likely to remain stable in 2018. In Malaysia and Vietnam, growth is expected to ease, as public investment moderates in the former and agricultural production stabilises in the latter after rebounding in 2017.
Prospects for several of the smaller economies are generally favourable, in part due to higher commodity prices. In Myanmar, economic growth is projected to rise in 2018, although investment prospects could deteriorate with the problems in Rakhine state. Mongolia’s higher growth is predicated also on continued macroeconomic stabilisation. Papua New Guinea could experience a cyclical recovery as commodity prices rise, although the recent earthquake could hurt prospects. Growth in Cambodia is expected to pick up slightly, while Laos will likely see stable growth.
“Robust growth has underpinned the region’s tremendous gains in reducing extreme poverty. To build on this success, and improve prospects for the large share of the population who remain economically insecure, will require sustaining growth over the longer term,” said Victoria Kwakwa, World Bank vice president for East Asia and the Pacific. “Policymakers need to focus on addressing risks to economic stability while taking steps to enhance longer-term growth potential.”
The growth outlook for the Pacific island countries is mixed. Growth in Fiji and the Solomon Islands is projected to ease. Growth in the smaller island states is expected to be modest but volatile due to their high susceptibility to natural disasters and reliance on commodity imports.
“While the region’s growth outlook is positive, there are challenges for policy makers in the short and medium term,” said Sudhir Shetty, World Bank chief economist for the East Asia and Pacific region. “Addressing these challenges will require measures to dampen the possible impacts of a more rapid pace of monetary policy tightening in advanced economies as well as to enhance longer-term growth prospects in the face of policy uncertainty, particularly around global trade.”
With continued threats to the global trading system, developing EAP can respond by deepening its own trade integration and facilitation, through such mechanisms as the Asean Economic Community, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the Belt and Road Initiative. Done well, these initiatives will be even more important as countries adapt their manufacturing-led development strategies to the emerging challenges of labour saving technologies and automation, and the blurring of the lines between manufacturing and services, the report said.