East Asia's economy brightest in four years

East Asia's economy brightest in four years

Karl Malakunas, Agence France-Presse, Singapore

East Asia's economies will grow nearly twice as fast as the world rate this year on the back of China's continued strength, helping to lift millions of people above the poverty line, the World Bank said on Tuesday.

The region's expected expansion of 6.3 percent in 2004 will be the fastest since the global economic slowdown began in 2000, the multilateral finance agency said in its twice-yearly East Asia update.

"With the strong recovery in the United States and Japan, increased demand for East Asian exports and the long-awaited rebound in the hi-tech sector, the outlook is very positive for the big countries and for the smaller ones," World Bank regional vice president Jemal-ud-din Kassum said.

East Asia's expected growth rate compares with a forecast of 3.7 percent globally and 4.6 percent for the United States.

China, which now accounts for about half the export growth in most East Asian economies, is again expected to remain the driving force of the region's expansion with a 7.7 percent rise in gross domestic product this year.

The World Bank warned, however, there were risks for the region if Beijing's efforts to slow the nation's booming economy -- it grew by 9.1 percent in 2003 -- resulted in a "hard landing".

"The Chinese authorities are aiming to eliminate overheating by slowing growth to a more sustainable pace of around 7.0 percent, but their task is complicated by the limited range and bluntness of macroeconomic policy instruments available," the bank said in its report.

"A key risk at the regional level is that attempts to slow China's economy could overshoot... with obvious implications for regional trade and growth."

Nevertheless, the World Bank was optimistic slower growth would be manageable in China and this would have only a modest impact on other economies in the region.

"We believe that China will be able to achieve a soft landing," the report's lead author, Milan Brahmbhatt, told reporters via video-conference.

Thailand, with a forecast growth rate of 7.2 percent, and Vietnam, at 7.0 percent, are expected to have the next fastest growing economies in East Asia.

The World Bank also emphasized the region's low and middle- income countries should expand at 7.6 percent, their fastest rate since the 1997-1998 Asian financial crisis.

Rising commodity prices, partly fulled by China's insatiable appetite for raw goods, have been a big factor in helping the smaller economies, it said.

Prices for commodities such as cotton, rice, rubber and edible palm oils rose by between 10 and 20 percent in 2003 and have continued to surge in the first few months of this year, according to the World Bank.

This partly contributed to the incomes of 49 million people in East Asia rising above the poverty line benchmark of two U.S. dollars a day during 2003.

About 674 million people in the region, about 36.7 percent of the population, are now believed to be living on less than two dollars a day, down from 66 percent in 1990.

Of the 674 million people living below the poverty line, about 190 million live on less than one dollar a day, the World Bank said.

The World Bank also highlighted the strong performances of East Asia's newly industrialized economies, Hong Kong, Singapore and Taiwan, saying their strong recovery from the Severe Acute Respiratory Syndrome (SARS) crisis in the first half of last year would continue through 2004.

It said the newly industrialized economies would have a combined average growth rate of 5.5 percent, up from 3.0 percent last year.