ADB: Asia economies rebound, need to adjust policy

Tuesday, April 13, 2010
By HRVOJE HRANJSKI
AP

MANILA, Philippines — The Asian Development Bank raised its regional growth forecast this year from 6.6 percent to 7.5 percent on Tuesday but warned that governments need to adjust policies to avoid shocks that could hamper their recovery.

China is forecast to grow by 9.6 percent, after last year's 8.7 percent expansion almost singlehandedly lifted the region's overall growth to 5.9 percent, offsetting weakness elsewhere. Another powerhouse, India, is projected to see growth rise to 8.2 percent from last year's 7.2 percent.

Five Southeast Asian economies that contracted last year — Malaysia, Singapore, Thailand, Cambodia and Brunei — also are set to return to growth, together with Hong Kong, Mongolia and Taiwan, the bank said in its economic outlook.

In 2011, GDP growth across the region is seen easing back to 7.3 percent.

Investment is expected to remain strong and private consumption improve as projected growth this year and next lifts domestic demand, boosting consumer price inflation to about 4 percent, the bank said.

The fragile recovery still could be derailed by a premature withdrawal of stimulus, a sharp rise in commodity prices, persistent global financial imbalances and deteriorating debt positions in some countries, said ADB President Haruhiko Kuroda.

Asia's recovery is attracting large capital flows, the perils of which were made clear in the 1997-98 Asian financial crisis, he said.

"Volatile capital flows could again have serious implications for exchange rates and money supply," Kuroda said.

"As it exits the worst effects of this crisis, therefore, developing Asia must remain faithful to its tradition of sound and responsible fiscal and monetary policies," he said.

The bank proposed monetary, exchange rate and fiscal policies to enable the region to adapt to the post-crisis world. It said that while price stability is the overriding objective, there needs to be better coordination between fiscal regulation and monetary policy to avert a homegrown financial crisis.

"After all, the combination of lax monetary policy and inadequate financial regulation contributed to inflating the U.S. housing market bubble that the immediate catalyst of the global financial crisis," the bank said.

Excessive foreign exchange market intervention should be reduced in favor of greater flexibility, and capital controls could help guard against foreign exchange volatility, it said.

Developing Asia refers to 44 countries and territories from the Pacific to Central Asia, excluding Japan.

World Bank: East Asia needs reform to keep growing

April 7, 2010
By TOMOKO A. HOSAKA
The Associated Press
TOKYO

The World Bank raised its growth forecast for developing East Asia this year by almost a full percentage point to 8.7 percent on Wednesday but said the region's high-flying economies must make structural reforms to sustain their rapid expansion.

East Asia's developing economies have recovered from the global crisis, driven by a robust China, export demand and government stimulus, the Washington-based bank said in a semiannual report. It said industrial output, exports and employment were largely back to pre-crisis levels.

But the bank said countries must implement reforms "with vigor" to keep the rally going over the next decade. It also warned that it may be too early for most countries to completely end fiscal stimulus measures.

"East Asia will face a different global economy over the medium term," the report said. "Growth in developed countries will be slower than observed before the crisis."

For China, reforms mean rebalancing the world's third-biggest economy to reduce its reliance on exports and boost the service sector and private consumption, the World Bank said. It said China's gross domestic product is likely to grow by 9.5 percent this year.

China also needs a tighter monetary policy to control emerging risks such as inflation and a property bubble, the report said. Real estate prices were up 30 percent in February from a year earlier and continue to climb.

For middle-income countries such as Thailand and Vietnam, this means boosting investment in physical and human capital, the bank said. And low-income countries like Cambodia need to develop manufacturing prowess.

The World Bank says the region also needs to address deeper economic integration and tackle climate change.

"The region has enormous scope to move rapidly toward the green technology frontier," said Ivailo Izvorski, lead economist and principal author of the World Bank report. "This will not only improve the livability and sustainability of East Asia's ever growing cities, it will also give the region a competitive advantage in an industry poised for rapid global growth."

The region emerged from last year's crisis in solid form, the bank said. Deficits are manageable, and social safety measures protected the poor from the downturn's harshest fallout, it said. Monetary authorities are beginning to wind down emergency policy schemes.

Developing East Asia and the Pacific comprises 13 countries including China, Indonesia, Malaysia, Vietnam and the Philippines. It does not include the more developed economies of Japan, Hong Kong, South Korea, Taiwan and Hong Kong.

World Bank Forecasts More Growth in 2010

By Chun Sakada, VOA Khmer
Original report from Phnom Penh
07 April 2010

The World Bank said Wednesday that Cambodia’s economy is expected to grow around 4.4 percent this year, signaling a recovery from the economic crisis and a recession in 2009.

A World Bank economist told VOA Khmer Wednesday that growth could climb as high as 6 percent in 2011, a rate that would be close to the galloping growth the country experienced in the years preceding the global downturn.

“Recorded agri-business exports more than doubled, especially in milled rice and rubber exports, year-on-year air tourist arrivals stopped declining, imports of consumer goods stabilized, and both domestic credit and inflows of foreign direct investment began rebounding,” the World Bank said in a statement Wednesday.

Cambodia’s economy contracted 2 percent in 2009, driven by poor exports of garments, less tourism and a 35 percent drop in foreign direct investment, the World Bank said.

Chea Hout, a Cambodian economist for World Bank, said Cambodia still had a high amount of its exports—60 percent—destined for the US, while a full two-third of its imports came from China, Singapore, Vietnam and Thailand.

“Cambodia’s economy is still very narrow,” he said. “So it can be highly vulnerable to the external environment.”

A diversified economy and structural and institutional reform would improve the investment climate, he said, which would in turn help Cambodia compete with other countries to reach the international market.

The World Bank suggested the region’s middle-income countries, including Vietnam and Thailand, invest in physical and human capital to move up the value chain, while low-income countries like Cambodia should focus on manufacturing and on becoming a part of global and regional production networks.

Sang Sinavith, a customs official, told reporters Wednesday Cambodia had exported $3.9 billion in goods in 2009, but he expected exports totaling more than $4.1 billion this year.

However, the country is still running a trade deficit, having imported $5.45 billion in goods in 2009 and potentially $6.38 billion in 2010, he said.

World Bank sees Cambodian GDP recovery in 2010

PHNOM PENH, May 8 (Reuters) - Cambodia's economy is expected to contract by 1 percent this year because of the global economic slump, but it will grow by 3 percent in 2010, the World Bank said on Friday.

Cambodia's economic growth has accelerated over the past decade since the end of the country's civil war, thanks to exports of garments to the United States and European Union, a boom in tourism and bountiful agricultural production.

But growth fell back to 5.5 percent in 2008 and now a contraction is likely because the global crisis has hurt garment exports, which brought in $2.78 billion in 2008 as the main currency earner, and caused the number of tourists to drop.

'Net exports will slow with overall global trade volumes as well as through market share losses in Cambodia's main export market of the U.S.,' the World Bank said.

Household consumption, incomes, employment and private investment, including foreign direct investment (FDI), were all slowing, it said.

Huot Chea, an economist at the World Bank in Phnom Penh, forecast FDI at just $390 million in 2009 after $790 million last year, but he expected an increase to $500 million in 2010.

The number of tourist arrivals dropped 2 percent in the first two month of 2009 compared with the same period last year, the report said, adding that occupancy rates in major hotels were well below 40 percent.

However, the government was taking action to mitigate the economic downturn, including credit for farmers, training for laid-off workers and other expenditure programmes, he said.

(Reporting by Ek Madra; Editing by Alan Raybould)