WB forecasts continued growth in East Asia

WB forecasts continued growth in East Asia

WASHINGTON (AFP): East Asia should enjoy high economic growth into the next century but must commit itself to ending poverty and inequality in income distribution, the World Bank said Monday.

A recent slump in certain countries reflects temporary phenomena and does not point to economic decline, the Bank found in its latest regional forecast.

"Some economies are going through adjustments but the underlying growth momentum remains extraordinarily strong."

The study stressed that contrary to fears in certain quarters that robust East Asian expansion can hurt job growth in the West, "rapid East Asian growth is good for the world."

"When East Asia's exports grow, so do its imports."

While the region, excluding Japan, accounts for only eight percent of global gross domestic product, it takes in 17 percent of world imports and is expected to account for more than 25 percent in global imports between now and the end of the decade.

The Bank acknowledged that such growth is most beneficial to skilled workers outside the region but insisted that "recent research indicates that on balance rising trade with East Asia helps, not hurts, unskilled workers as well."

The report said growth in the region since 1990 has averaged nine percent, up from seven percent in the previous decade.

Concern was recently raised by a fall-off in double digit export growth in China, South Korea, Singapore and Thailand.

Deficits

In addition, according to the World Bank, current account deficits exceeded eight percent of gross domestic product in Malaysia and Thailand. The stock market has fallen 20 percent in Korea this year and 30 percent in Thailand.

But the Bank determined that the bad news was largely "cyclical," notably as the export slowdown reflected slumping computer chip sales -- which it said are now picking up.

Current account deficits were driven by heavy inflows of private capital rather than low domestic savings, according to the Bank, adding that most countries had managed to cool down overheated growth.

But the Bank cautioned that despite prospects for sustained impressive expansion, East Asia remains a low income region, one where 80 percent of the population has per capital income of less than US$600 a year.

For that reason, and in the face of "growing concern over income distribution, the Bank urged that governments give priority to rural development, the provision of social services and the inclusion in the economic boom of those at risk of being left behind.

In addition, the Bank recommended:

-- Increased investment in infrastructure to relieve bottlenecks.

-- Reforms to state enterprises and the financial sector.

-- Upgrading the quality and productivity of labor.

-- The development of mechanisms to manage lifetime health and unemployment risks in the face of rapidly aging populations.

-- Making environmental protection a priority.

"The so-called East Asian 'miracle' is not and never has been on automatic pilot," according to the Bank.

"It has been based on continuing policy and institutional change to meet the evolving demands of development."