East Asia's economies to grow more than 7%: WB

East Asia's economies to grow more than 7%: WB

Hrvoje Hranksi, Associated Press, Manila, Philippines

A fifth year of powerful economic growth in East Asia and the
Pacific has driven the number of people living in poverty in the
region to its lowest level ever, but the World Bank warned on
Tuesday that oil prices could dampen the boom next year.

Led by China's strong performance, growth in East Asia -
excluding Japan - is projected at 7.1 percent. For developing
countries, it will be 7.9 percent, the World Bank said in a
report. At the same time, the region's population has jumped by
about 4 percent, to around 1.85 billion.

The remarkable growth has brought the number of people living
on US$2 or less a day down to 636 million, or about a third of
the population - as compared with nearly 890 million five years
ago.

With an average growth of 6 percent a year since 1999, "there
could hardly be more striking evidence as to the power of
sustained economic growth to reduce poverty," the bank said.

"Even excluding China, the absolute number of poor would be at
their lowest level ever, finally overcoming the higher poverty
created by the 1997 crisis," said Jemal-ud-din Kassum, regional
vice president for East Asia and Pacific.

However, the report warned that recent growth in Asia has
peaked and economic activity is shifting - if it hasn't already -
to lower gear. It said the outlook for 2005 looks less favorable
because of the spike in oil prices, slower growth in rich
countries and a slowdown in global demand for information
technology products.

"In a word, the environment facing East Asia is more
uncertain," it said.

In April, the bank predicted the region would grow 7.3 percent
in 2004 and 6.5 percent in 2005. The latest report cut the 2005
forecast to 5.9 percent.

High growth in Asia is led by strong exports, supported by
demand from China, the global recovery, a rebound in the global
high-tech industry, and strong commodity prices.

Kassum also noted that the expansion was taking place "during
a time of major political advances with a sweep of legislative
and presidential elections, including Indonesia's first-ever
direct election of a president, capping what looks like being a
remarkable year for the region."

Efforts by China, which has two-thirds of Asia's poor, to
reduce poverty dominated the regional picture, the bank said.

Poverty in China is estimated to have fallen to about 32
percent in 2004 from 34 percent in 2003 and 70 percent in 1990,
driven by significant gains in rural income - mainly due to
increased agricultural output, higher grain prices, introduction
of direct subsidies to farmers and reduction in agricultural
taxes.

A recent World Bank study of poverty in China, which mainly
affects rural areas, found that poverty reduction has been
directly linked to economic growth - in general, a 1 percent
increase in average incomes has led to a 2.5 percent-3.5 percent
fall in the poverty line.

But it also cautions that widening income inequality has
partly offset the benefits of growth.

The study attributed China's agrarian reforms of the early
1980s to over half of all the poverty reduction in 1980-2001.
Indonesia, Thailand and Vietnam also have made major strides.

Between 1998 and 2002, 8 percent of Vietnam's 80 million
population moved out of poverty, particularly in the tourism-
vibrant northeastern corner, the bank said. But it added that the
progress was uneven, with little or no reduction in three out of
the country's eight regions.

In Thailand, poverty has fallen from 22 percent in 2000 to an
estimated 14 percent this year, benefiting from stronger economic
growth and the boost to rural incomes given by higher world
prices for Thailand's export crops.

Elsewhere in the region, poverty reduction has been less
robust.

In the Philippines, which is facing a growing foreign debt and
deficit, average family expenditures have declined, while in
Cambodia, estimates suggest that poverty at $1 a day has been
flat in a 40 percent-50 percent range in recent years, the bank
said.