The Asia Pacific region will experience slower growing economies in 2012 according to the World Bank’s Global Economic Prospects report January 2012.
Economic growth for the region is projected to ease for the second straight year to 7.8 percent in 2012 and 2013.
“For the majority of countries in the region, the health of the global economy and high-income Europe, in particular, represents the strongest risk at this time,” says the World Bank. “If the situation in Europe deteriorates sharply, global trade could fall by 5 or more percent with serious implications for the very open East Asia region.”
“Despite the increasingly cloudy global environment and the anticipated economic slowdown, growth in the East Asia and Pacific region will remain fairly robust due to strong domestic demand, substantial fiscal space for policy interventions, downside flexibility in policy interest rates, and significant reserve levels,” the report says.
The World Bank notes that the economies of Malaysia, Indonesia, Thailand and the Philippines slowed sharply to 4.6 per cent in 2011. It predicts growth in these countries will be mixed this year, but that strengthening domestic demand will help mitigate global pressures.
“Both Thailand and the Philippines may be able to avert a slowing of GDP in 2012. In the former, reconstruction spending to repair the extensive damage from flooding may provide a boost to output growth in 2012; while in the latter economy the continued strength of remittance inflows and renewed public spending is projected to boost growth to 4.2 percent from 3.7 percent in 2011.”
It says Vietnam, Cambodia, Lao PDR and small Pacific island economies are less well positioned than the major countries of the region, with limited space for policy change and less reserves to stem financial disturbances.
“Looking forward, growth in Vietnam and Cambodia is projected to strengthen somewhat further during 2012 and 2013 due to the ability to utilize hydrocarbon windfalls to sustain spending in the former, and improved macroeconomic stability in the latter.”
“Remittance receipts are potent drivers for growth in countries from the Philippines to the small island economies—and these flows, as well as tourist arrivals (important for the region broadly) could slow because of sluggish labor market and growth developments in the OECD, although migrant remittances held up quite well during the 2008-2009 crisis,” the report says.