MANILA, Philippines — Developing East Asia and the Pacific, which includes the Philippines, will still grow faster than other regions, but these challenges in 2012 should not be taken lightly: lower demand for export products and the unfolding eurozone crisis.
In the next few months all eyes will be on the anticipated slowdown of the Chinese economy, which could trigger an unexpected drop in commodity prices, warned the Washington-Based World Bank in its report for the region released on Wednesday, May 23.
Bert Hofman, World Bank chief economist for the region, believes most developing East Asia and the Pacific economies have proven to be resilient enough to shocks, but stressed that the region has to watch out for the impact of the current crisis in the European Union.
The eurozone, along with the United States and Japan, provides one-third of trade and project finance in Asia.
“Risks emanating from Europe have the potential to affect the region through links in trade and finance,” Hofman noted in a statement
Less reliance on exports
The World Bank expects that external demand will likely continue to be weak as the region experiences slower pace of growth this 2012.
It then called on countries to “rely less on exports and more on domestic demand” in order to maintain high growth, a direction in which some nations are moving but others have not yet adopted.
Export-reliant economies in the region should take measures to stimulate household consumption or, if they are able to, invest in areas such as infrastructure.
“With a changing financial sector in the aftermath of the financial crisis, new ways to finance higher levels of infrastructure investment need to be developed. Governments would need to focus on accelerating the preparation of infrastructure projects,” said World Bank economist Bryce Quilin, chief author of the report.
Other priorities are improving labor productivity and policies to support regional migrations, in particular to allow countries with declining working age populations to meet labor demand.
The region will grow at 7.6% in 2012, slower than the 2011’s solid growth rate of 8.2%, itself already slower than the previous year, the World Bank said.
China was responsible for over half of the growth in 2011, a larger percentage than in 2010.
Nevertheless, the World Bank said the region grew about 2% faster than the worldwide average for developing countries, and poverty continues to fall.
Growth in 2011 was slowed partly due to the effect of natural disasters such as the devastating earthquake and tsunami in Japan and severe floods in Thailand, which disrupted the supply chains of both multinational and local corporations.
On the other hand, domestic demand and investment continued to be “generally strong” and some countries relaxed their monetary policies.
This trend will presumably continue in 2012, according to the World Bank.
Despite the slower economic growth, the World Bank noted that developing East Asia and the Pacific has effectively slashed in half its poverty rate in the past decade and will further reduce it by 24 million people in 2012.
But a third of the regional population, roughly half a billion people, still lives on less than US$2 a day, said Pamela Cox, regional Vice President for the World Bank.
“In an uncertain global environment, more needs to be done to create new sources of growth that provide opportunities for all.” – Rappler.com