Strong growth in developing East Asia faces risks from global uncertainty and natural disasters

Press Release No:2012/160/EAP
Source: The World Bank

Singapore, November 22, 2011 — Growth is still strong in developing East Asia, but continues to moderate mainly due to weakening external demand, underscoring the need for governments to refocus on reforms to increase domestic demand and productivity, says the World Bank in its latest East Asia and Pacific Economic Update released today.

The report, issued biannually, projects that amid uncertainties in Europe and a global growth slowdown, real GDP in developing East Asia will increase by 8.2 percent in 2011 (4.7 percent excluding China) and by 7.8 percent in 2012. Domestic demand in middle-income countries was the largest contributor to growth in the region, although it is easing driven by the normalization of fiscal and monetary policy.

"Lower growth in Europe in the course of fiscal austerity and the banks?needs to increase capital coverage would affect East Asia. Less credit from European banks can also affect capital flows to East Asia, but high reserves and current account surpluses protect most countries in the region against the impact of possible renewed financial stress," said Bert Hofman, World Bank Chief Economist for the East Asia and Pacific Region.

Hatoyama outlines East Asia bloc

Monday, Nov. 16, 2009

Borrowing from 'yu-ai,' key concepts include regional prosperity, environmental cooperation

SINGAPORE (Kyodo) - Prime Minister Yukio Hatoyama on Sunday highlighted four key areas of cooperation in his concept for an East Asian community — regional prosperity, the environment, protecting human life and maritime safety.

Hatoyama indicated the U.S. is a potential member of his envisaged regional grouping, saying in a speech in Singapore, "The presence of the United States has been playing and will continue to play an important role in ensuring the peace and prosperity of Asia, including Japan."

Hatoyama said Japan will speed up negotiations for economic partnership agreements with South Korea, India and Australia, and study the possibilities of talks with other countries as a means to pursuing prosperity in the region.

Hatoyama proposed expanding maritime cooperation in Southeast Asia, such as antipiracy operations in the Strait of Malacca, to other regions as part of efforts to build a "sea of 'yu-ai' (fraternity)," noting that "most regional commerce depends on sea routes."

"The concept behind my initiative for an East Asian community stems from the philosophy of yu-ai," he said. "Within yu-ai, people respect the freedom and human dignity of others just as they respect their own freedom and human dignity. In other words, yu-ai means not only the independence of people but also their coexistence.

"I set this goal because reconciliation in the real sense of the word is not necessarily believed to have been achieved in the region," said Hatoyama, whose two-month-old government attaches great importance to Asian diplomacy.

"This is the current situation, although more than 60 years have passed since Japan caused tremendous damage and suffering to the people of many countries, particularly on the people of Asian nations."

Hatoyama expressed hope that developing countries will take advantage of advanced energy-saving technologies, water purification techniques and other environment-focused technologies owned by Japanese companies as they aim to reduce greenhouse gas emissions while pursuing sustainable growth to achieve a "green Asia."

He stressed that countries need to ensure the success of the key U.N. climate change meeting next month in Copenhagen, where the world will try to strike a deal on a successor to the Kyoto Protocol.

Hatoyama said Japan will make a "proactive contribution" to encourage governments and other institutions to register their human and material assets for disaster relief, which would allow the region to conduct more prompt and effective rescue and relief activities in response to disasters.

Along with the four areas, Hatoyama cited nuclear disarmament, nuclear nonproliferation, urban issues, social security and cultural exchange as potential fields of regional cooperation.

"There may also be an opportunity for us to discuss possible political cooperation in the future," he said.

"It may be possible that countries with the will and the capabilities to cooperate in a particular field may choose to participate in projects initially, and as their efforts bear fruit, other countries could join later."

While welcoming Washington's commitment to Asia as stated in President Barack Obama's speech in Tokyo on Saturday, Hatoyama carefully avoided speaking about Washington becoming a member of his envisaged East Asian community.

As a framework of future regional cooperation, China envisions a grouping of 13 countries — Japan, China and South Korea plus the 10 Association of Southeast Asian Nations members of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Japan envisages a wider grouping including Australia, India, New Zealand and possibly the United States.

ADB foresees economic slowdown in Asia in 2008

HONG KONG, Dec. 14 (Kyodo) - Economic growth in emerging economies of East Asia next year will ease a bit from 2007 due to the slowdown of the U. S. economy, the credit outlook and rising oil and commodity prices, the Asian Development Bank said Thursday.

The Philippines-based bank, in the December edition of its semiannual Asia Economic Monitor, said economic growth in emerging East Asia will ease to 8 percent in 2008 from 8. 5 percent in 2007 as expansion in key industrialized nations moderates amid volatility in financial markets and rising oil prices.

''Slower growth but rising inflationary pressures -- despite appreciating currencies -- pose major challenges for the region's policy-makers,'' the report said.

The emerging economies were identified as China, Hong Kong, Taiwan, South Korea and the 10 members of the Association of Southeast Asian Nations, which groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

The report said China's growth is forecast to slow from 11. 4 percent in 2007 to 10. 5 percent next year if measures to cool the economy begin to take hold, the report said.

A series of tightening measures has been introduced by Beijing to curb rapid investment growth and asset-price inflation since mid-2006, but the full effect has yet to be seen.

Growth in the ASEAN region will slightly moderate to 6. 1 percent next year from 6. 3 percent in 2007, the report said, The report said a hard landing of the U. S. economy could have a significant impact on the emerging East Asia's growth as trade linkages with the major industrialized economies remain strong.

''The U. S. current account deficit this year is expected at 5. 6 percent of GDP, down sharply from 6. 2 percent last year.

Still, resulting global imbalances remain extremely large.

''To the extent that the ongoing correction in global financial markets may reflect the dynamics of underlying market forces to reduce the scale of global imbalances -- which entails a U. S. dollar depreciation, U. S. economic slowdown, and reduction of U. S. dollar asset returns -- even a gradual and thus protracted unwinding process would have significant impact on emerging East Asian markets,'' it said.

In conclusion, the report said that against a backdrop of continued uncertainty over the future growth outlook and global financial stability, ''deeper and more comprehensive'' financial sector and market reforms are required to enhance flexibility and resiliency of the region's banking and financial systems.

''Strengthening regulatory and supervisory frameworks is particularly important for emerging East Asian markets that employ relatively weak financial market infrastructure for credit risk assessment and effective risk management,'' it said.

''Formulating an appropriate policy framework to prepare for possible risks from continued global financial instability can help insulate emerging East Asia from any major deleterious effects.''