According to a World Bank press release, stronger growth in advanced economies, a moderate recovery in commodity prices, and a recovery in global trade growth, are the favourable external factors that will support the economies of developing East Asia and Pacific to expand by 6.4 per cent for 2017.
The October 2017 edition of the East Asia and Pacific Economic Update reports that the uptick in growth in 2017 relative to earlier expectations reflects stronger than expected growth in China, at 6.7 per cent, the same pace as in 2016. In the rest of the region, including the large Southeast Asian economies, growth in 2017 will be slightly faster at 5.1 per cent in 2017 and 5.2 per cent in 2018, up from 4.9 per cent in 2016.
The press release notes that several external and domestic risks could impact this positive outlook. Economic policies in some advanced economies remain uncertain, while geopolitical tensions centred on the region have increased. Monetary policies in the US and the Euro Area could be tightened more quickly than expected. Many countries in the region have high levels of private sector debt while fiscal deficits remain high or are on the rise.
"The recovery of the global economy and the expansion of global trade are good news for the East Asia and Pacific region and its continued success in improving living standards," said Victoria Kwakwa, World Bank Vice President for the East Asia and Pacific Region.
"The challenge will be for countries to strike a balance between prioritising short-term growth and reducing medium-term vulnerabilities, so that the region has a stronger foundation for sustained and inclusive growth."
The press release also includes comments from Sudhir Shetty, World Bank Chief Economist for the East Asia and Pacific region, who said, "The improved prospects for global growth offer a window of opportunity for countries to reduce vulnerabilities while pursuing reforms that can yield growth dividends over the longer term.
"Reducing risks to financial sector stability and strengthening competitiveness, including through deeper regional integration, remain priorities."
To maintain resilience against risks, the report calls for a move away from measures aimed at short-term growth towards policies that address financial sector and fiscal vulnerabilities. These measures include: strengthening supervision and prudential regulation in countries experiencing rapid growth in private-sector credit and debt; reforming tax policies and administration to help boost revenue collection; and being ready to tighten monetary policy if warranted by the pace of interest rate increases in advanced economies.
The report also highlights the potential that tourism development and deeper regional integration offer to offset the risks of protectionism. Growth in tourism, if well managed, has the potential to yield substantial benefits to the region, including for the Pacific Island Countries. It notes that the Asean Economic Community offers one avenue for promoting further regional integration, including by further liberalising trade in services and reducing non-tariff barriers.
Despite success in reducing poverty, high and rising inequality is a growing concern, as are falling mobility and growing economic insecurity. For lasting inclusive growth, measures to reduce extreme poverty must be accompanied by policies that broaden access to quality services and more productive jobs, and stronger social protection systems that reduce the consequences of adverse shocks.
The East Asia and Pacific Update is the World Bank’s comprehensive review of the region’s economies. It is published twice yearly and is available free of charge at the World Bank’s website.
Published : October 10, 2017
By : Borneo Bulletin/ANN