Tokyo, December 10, 2008: While East Asian countries have entered the current
crisis substantially better prepared than they were for the 1997 Asian
financial crisis, none have been spared the full fury of the global economic
storm, says the World Bank?s latest six-monthly assessment of the East Asia &
Pacific region?s economic health.
In the face of weakening export growth and reduced levels of investment and
consumption, the latest East Asia & Pacific Update forecasts that real GDP
growth in developing East Asia* will slow to 6.7 percent in 2009 from 8.5
percent in 2008. And the GDP growth forecast for East Asia as a whole (that
includes all developing economies as well as Korea, Singapore, Hong Kong and
Malaysia) will be down to 5.3 percent in 2009 from 7.0 percent this year.
The report notes that the downside risks to East Asia are substantial in the
near term but highlights that countries will be better positioned to deal with
the crisis if they are able to maintain macroeconomic stability, shift exports
to faster growing regions in the world, substitute external with domestic
demand, and continue with structural reforms to strengthen competitiveness.
World Bank Vice President for the East Asia and Pacific region Mr. Jim Adams
applauded East Asian governments for their swift and effective policy
interventions to avert the worst impacts of the global crisis so far.
"Thanks to the quick action of policy makers from virtually every East Asian
country, banking systems have been able to deal with the crisis so far and in a
number of countries, economic stimulus packages are being put in place," Mr.
Adams said. "These actions are helping East Asia continue to play a key
stabilizing role and act as a growth pole for the global economy."
Mr. Adams said despite the global downturn, the World Bank projects that East
Asia will contribute about a third of total global growth in 2008.
While sobering in its forecast for 2009, the report states that the countries
which have entered this crisis with low debt burdens, surpluses in their fiscal
and external current accounts and large external reserves will have the most
room to maneuver as the crisis unfolds.
"Despite the difficult road ahead, those countries that sustain the sound
policies pursued thus far and tackle new challenges decisively will be the ones
to emerge in a strengthened position when the global economy begins to
recover," said Vikram Nehru ? the World Bank's Chief Economist for East Asia
and the Pacific.
The report warns that the region?s most vulnerable countries are those with
more open capital accounts, large non-resident holdings of equities, and a
strong reliance on foreign portfolio investment. Low income countries (Lao PDR,
Cambodia, PNG, Timor-Leste, and small island states in the Pacific), on the
other hand, have not been affected as much from the financial turbulence
because their banking systems are less exposed to global markets, but they too
will be impacted by lower commodity export earnings, tourism receipts, and
remittances from overseas workers.
Poverty rates are likely to fall further in 2009, declining to 10.68 percent
for developing East Asia as a whole, compared with the 10.36 percent projected
earlier this year. While the number of poor people in the region will continue
to decline, an estimated 5.6 million more people would have emerged from
poverty next year if not for the slump.
* Developing East Asia includes China, Indonesia, the Philippines, Thailand,
Vietnam, Cambodia, Lao PDR, Mongolia, Papua New Guinea and the island economies
of the Pacific.