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WB cuts growth forecast for developing countries

October 09, 2012

SINGAPORE, Oct 8: The World Bank on Monday slashed its 2012 growth forecast for developing countries in East Asia and the Pacific to 7.2 per cent, dragged down by China’s worst economic performance in 13 years.

It said China’s economy would grow just 7.7 per cent this year, down from 9.3 per cent in 2011 and its slowest rate since 1999, but added that stimulus measures would help push it back above the crucial 8.0 per cent mark in 2013. The 2012 gross domestic product (GDP) projections in a report called the East Asia and Pacific Data Monitor were down from a May forecast of 7.6 per cent growth in the region and 8.2 per cent in China.

The report comes as the Washington-based World Bank and IMF prepare to hold their annual meetings at the end of the week. The Group of Seven advanced economies will also meet to discuss the global outlook.

Despite the downgraded numbers, Bert Hofman, the World Bank chief economist for East Asia and the Pacific, said: “Our main forecast is still that China will have a soft landing.” He also told journalists in Singapore that while there is a risk of a major slowdown, “we think it’s small, not least because of the policy space that the authorities still have and the likelihood that they will indeed use it.

“They have enough fiscal space, they still have some monetary space so they could revamp the economy... if and when needed.” Hofman noted that China was being hit by a “double whammy” of an export slowdown and softer domestic demand.

In East Asia and the Pacific, regional growth will be the slowest since 2001, even worse than at the peak of the global financial crisis in 2009, Hofman said.

The bank, however, said this should rebound to 7.6 per cent in 2013, driven by domestic demand. But it warned that a worsening of the eurozone debt crisis, problems in the US and a further slowdown in China are major risks. Hofman said East Asia and the Pacific’s growth rates are “still the envy of many in the developed world” and its share of the world economy has tripled in two decades to nearly 18 per cent of global output.

The region covered by the new forecast comprises China, Indonesia, Malaysia, the Philippines, Thailand, Vietnam, Cambodia, Fiji, Laos, Mongolia, Myanmar, Papua New Guinea, the Solomon Islands and East Timor.

After China, the fastest-growing major economies in the region this year are Indonesia at 6.1 per cent, the Philippines at 5.0 per cent, Malaysia at 4.8 per cent and Thailand at 4.5pc.—AFP