“Unlike the rest of the region, China is experiencing a double whammy—the growth slowdown is driven by weaker exports as well as domestic demand, in particular investment growth,” World Bank Chief Economist for East Asia and the Pacific Bert Hofman said at a briefing in Singapore.
He stressed, however, that the World Bank, like many economists, still expects China to have a soft landing as seen from the bank’s revised 7.7 per cent growth forecast for this year and 8.1 per cent for next year.
The World Bank on Monday released its latest East Asia and Pacific Data Monitor, warning China’s that slowdown could accelerate.
In the report, the international lender said that ambitious investment plans announced by several local governments in China could face funding constraints, “not least because governments are feeling the pinch of a cooling real estate market, which lowers land sales revenues”.
The World Bank said the central government was unlikely to come up with a major fiscal stimulus package as policymakers were concerned about a rebound in home prices and a possible reversal of hot money flows.
Nevertheless, the bank expects growth in China to pick up in 2013, helped by monetary policy measures introduced earlier this year and an acceleration of central government investment spending.
The World Bank had earlier this year forecast 8.2 per cent GDP growth for China in 2012 and 8.6 per cent in 2013.
For the region as a whole, the World Bank now expects developing East Asia to grow by 7.2 percent this year and 7.6 percent in 2013, down from earlier estimates of 7.6 percent and 8.0 percent, respectively.
“This is the slowest growth rate in the Asia Pacific region since 2001. It’s even slower than the peak of the financial crisis in 2009,” Hofman said.
The World Bank last week cut its 2012 growth forecast for sub-Saharan Africa to 4.8 per cent from 5.2 per cent, and lowered its outlook for Latin America to 3 per cent from the previous 3.5 to 4 per cent, citing the global economic slowdown.
“Economic projections for EAP (East Asia and Pacific) are surrounded by considerable uncertainties, and a variety of risks continue to loom over the global and regional economy,” the bank said.
“Although recent policy moves have reduced the risk stemming from the Eurozone, financial market disruptions still constitute the main risk to this outlook, followed by the ‘fiscal cliff’ risk in the United States,” it added, referring to the sharp cuts in U.S. government spending that could be triggered next year if lawmakers fail to reach a new agreement.
Most developing East Asian economies were well positioned to weather troubles in the global economy as they enjoyed current account surpluses or only modest deficits and held high levels of foreign exchange reserves relative to their international payment obligations, the World Bank added.
Hofman said the latest round of “quantitative easing” by Western central banks will not be as disruptive to East Asia as previously, as weakening exports coupled with still strong imports mean overall inflows to the region were not as large as they had been in the past.
“It was a problem almost two years ago and even one year ago but it seems less of a problem now,” he said.
The U.S. Federal Reserve last month unveiled a third round of quantitative easing, whereby it will inject new money into the system by buying mortgage securities. The European Central Bank has also announced plans to buy the bonds of trouble eurozone countries such as Spain to bring borrowing costs down.
Original Article
Source: the star
Author: Kevin Lim
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