World Bank trims China outlook

Economic growth in the emerging economies of East Asia would reach 7.1 percent on average in 2014, the World Bank said in its East Asia and Pacific Economic Update report released Monday.

The global development lender, which is based in Washington, slightly revised its outlook for the region from an overall growth figure of 7.2 percent estimated in autumn last year.

For 2015 and 2016, the World Bank penciled in a growth rate of 7.1 percent for both years, which is significantly lower than the 8.0 percent on average reached by East Asia between 2009 and 2013.

“A slower-than-expected recovery in advanced economies, a rise in global interest rates, and increased volatility in commodity prices on account of recent geo-political tensions in Eastern Europe serve as reminders that East Asia remains vulnerable to adverse global developments,” World Bank's Chief Economist for East Asia and the Pacific, Bert Hofman, said in the report.

Hofman also noted, however, that headwinds from the tightening of global financial markets would be offset partly by tailwinds from global trade.

Many countries in East Asia have suffered from capital outflows in the second half of 2013 as investors redirected funds from emerging economies to advanced markets in the United States and Europe. This happened because the US Federal Reserve Bank (US Fed) had announced it would scale down its monetary stimulus for the US economy, leading to expectations of higher interest rates and better yields for investments there.

As a result, the World Bank expects the steepest declines in countries heavily dependent on foreign capital for growth. Thailand, for example, would see its output expansion fall from a previously estimated 4.5 percent to 3 percent in 2014, the report noted.

China, which is the economic powerhouse of the region and the world's second largest economy, would primarily feel the pinch of domestic economic reforms, including tighter credit conditions, the bank said.

“While the growth rate of industrial production has slowed, and exports contracted in the first two months of 2014, the trend is nevertheless strengthening, and we expect quarterly growth to rise at midyear,” the report noted.

uhe/hc (AFP, Reuters)