East Asia and Pacific Economic Update, December 2012 – Remaining Resilient
December 19, 2012
- Economies of developing East Asia and Pacific remained resilient despite the lackluster performance of the global economy.
- The region will grow at 7.5 percent in 2012, lower than the 8.3 percent registered in 2011, but the region is set to recover to 7.9 percent in 2013.
- With weak demand for exports from global markets, domestic demand has remained the main driver of growth for most economies of the region.
- The region is expected to contribute almost 40 percent of global growth in 2012, and a similar share in 2013.
- China’s economic slowdown affected the region’s economic performance.
- China’s growth is projected to reach 7.9 percent this year, 1.4 percentage points lower than last year’s 9.3 percent and the lowest growth rate since 1999.
- Weak exports and the government’s efforts to cool down the overheating housing sector slowed down China’s economy in 2012, but it has recovered in the final months of the year.
- In 2013, China’s economy is expected to grow at 8.4 percent, fueled by fiscal stimulus and the faster implementation of large investment projects.
- Developing East Asia, excluding China, is doing better than last year, and is projected to grow 5.6 percent in 2012, higher than the 4.4 percent recorded in 2011.
- Continuing strong performances by Indonesia, Malaysia, and the Philippines will boost developing East Asia, excluding China, to 5.7 percent in 2013 and 5.8 percent in 2014.
- Another bright spot in the region, the Myanmar economy continued to accelerate in FY 2011-12, with GDP growth at 5.5 percent. It is expected to record 6.3 percent growth in FY2012-13.
- For 2014, we expect most countries in the region to benefit from a mild recovery in advanced countries as well as continued strong domestic demand.
- For China, we see some slowdown in 2014. China’s potential growth is projected to gradually slow, as investment levels off and productivity increase and labor force growth starts to slow. Our 2014 projection of 8 percent growth reflects that.
- There are considerable risks that could slow the region’s momentum, including possible delays of reforms in the Eurozone, the “fiscal cliff” in the US, and a possible sharp decline in the growth of investments in China.
- If a shock in growth were to occur, most countries could counter the impact by easing their fiscal policies.
- For economies in the region that face difficulties in budget execution, particularly of the capital budget, fiscal interventions could focus on increasing private domestic demand, such as targeted social assistance or investment tax credits.