This page in:
  • English

East Asia and the Pacific

    Recent developments

    Growth in the East Asia and the Pacific region continues to slow to a more sustainable level, with output expanding at 7.2 percent in 2013, only slightly down from 7.4 percent in 2012, but about 2 percentage points slower than the region’s pre-crisis average. In China, GDP grew by 7.7 percent in 2013, the same pace as in 2012, but well off its pre-crisis pace, which reflected the offsetting influences of growth support measures and administrative tightening introduced to rebalance the economy away from credit-fueled capital investment. Elsewhere in the region, trend growth has, thus far, been resilient to sharply slower Chinese growth in the post-crisis period, but growth slowed in 2013 in a number of large ASEAN countries, reflecting domestic adjustment in Indonesia and Malaysia, compounded by political instability in Thailand. Growth in the other economies of the region was slightly higher or broadly unchanged. Domestic adjustment has continued into 2014 as reflected in weak first quarter output growth across the region. There are, however, signs of strengthening of economic activity in the region reflecting growth supporting measures in China, easing of domestic adjustment in large middle-income economies of the region and a pick-up of global demand for exports.

    Policy tightening partly prompted by tightening financing conditions during the mid-2013 financial market turmoil, led to a decline in investment and imports, while private consumption remained resilient, with the notable exception of Thailand, and exports started to rebound led by a pick-up in global recovery. Net exports emerged as a positive contributor to regional output growth in 2013. This, combined with domestic adjustment, has helped reduce vulnerabilities. In particular, current account balances have improved (Indonesia and Thailand), real credit growth started to moderate towards more sustainable rates across the region, and price pressures have eased (Indonesia). Improved fundamentals, combined with increased global risk appetite contributed to a rebound of capital flows to the region. Indonesian Rupiah and Thai Baht, two regional currencies that had been hardest hit during the mid-2013 financial market turbulence, began recouping their losses in early 2014 although they remain weaker than a year ago in both nominal and real effective terms. Similarly, stock markets recovered in early 2014, but several remain well below their levels a year ago (especially Indonesia and Thailand). Borrowing costs have also eased.

    Outlook

    The outlook for the East Asia and the Pacific region continues to reflect several counterbalancing factors, including domestic adjustment, volatile financing conditions, political crisis in Thailand, and bumpy, but sustained recovery in global demand for exports. Overall growth in the region is expected to slow insignificantly to 7.0 percent by 2016, about 2 percentage points slower than the pre-crisis boom years but broadly in line with potential. Growth for China is expected to ease gradually to 7.6 percent in 2014 and to 7.4 percent by 2016, with less, but only gradually declining, reliance on credit-induced investment-led growth. The adjustment to more balanced growth will continue to pose challenges and the rebalancing process is expected to remain slow and volatile as adjustment-induced slowing is offset by loosening fiscal and monetary policies aimed at meeting annual growth targets. Regional growth (excluding China) is projected to gradually accelerate to 5.5 percent by 2016 as external demand solidifies, adjustment is completed and tensions ease in Thailand. Large imbalances will increasingly weigh on the outlook of a number of smaller economies, including Lao, PDR, Mongolia and Papua New Guinea, calling for strong policy actions.

    Risks

    Volatility and eventual tightening of financing conditions related to the normalization of monetary policy in the United States, a bumpy recovery of global demand for imports, and a sharper-than-expected slowdown in China present major risks to the regional outlook. Conversely, a faster recovery of global demand for imports and successful adjustment in China represent upside risks for the regional outlook. The current benign external financing environment may weaken incentives to implement domestic reforms. Large stocks of debt, accumulated during the years of credit-fueled investment-led growth, and structural constraints will increasingly weigh on the regional outlook. While the smooth adjustment to eventual policy tightening remains the most likely outcome, bouts of capital flow reversals and other forms of financial market volatility remain a risk.

    Risks related to China and to recovery in advanced economies present both upside and downside risks. A sharper-than-expected slowdown in China triggered by disorderly unwinding of imbalances, would generate substantial headwinds in the region. Successful economic rebalancing in China, on the other hand, presents an upside risk to the region. Similarly, faster-than-expected recovery in advanced markets would accelerate the recovery in global trade whereas a slower-than-expected recovery or protectionist measures or tighter financial conditions, including inadequate trade finance, would have a negative impact on the regional outlook.

    Regional forecast

    East Asia and the Pacific regional forecast
    (annual percent change unless indicated otherwise)

    Source: World Bank.
    a. Growth rates over intervals are compound weighted averages; average growth contributions, ratios and deflators are calculated as simple averages of the annual weighted averages for the region.
    b. GDP at market prices and expenditure components are measured in constant 2010 U.S. dollars.  
    c. Sub-region aggregate excludes Fiji, Myanmar and Timor-Leste, for which data limitations prevent the forecasting of GDP components or Balance of Payments details.
    d. Exports and imports of goods and non-factor services (GNFS).

    Country forecasts

    East Asia and the Pacific country forecasts
    (annual percent change unless indicated otherwise)

    Source: World Bank.
    World Bank forecasts are frequently updated based on new information and changing (global) circumstances. Consequently, projections presented here may differ from those contained in other Bank documents, even if basic assessments of countries’ prospects do not significantly differ at any given moment in time.
    Samoa; Tuvalu; Kiribati; Democratic People's Republic of Korea; Marshall Islands; Micronesia, Federated States; N. Mariana Islands; Palau; and Tonga are not forecast owing to data limitations.
    a. GDP growth rates over intervals are compound average; current account balance shares are simple averages over the period.
    b. The start of production at Papua New Guinea Liquefied Natural Gas (PNG-LNG) is expected to boost GDP growth to 20 percent and shift the current account to a 9 percent surplus in 2015.  The country's GDP deflators are expected to be updated in 2014 and the new GDP series is expected to be significantly different from the existing one.
    c. Non-oil GDP. Timor-Leste's total GDP, including the oil economy, is roughly four times the non-oil economy, and highly volatile, subject to global oil prices and local production levels.

    Capital flows

    East Asia and the Pacific net capital flows
    US$ billions

    Source: World Bank.
    Note: e = estimate; f = forecast. * including short-term and long-term private loans, official loans, other equity and debt instruments, and financial derivatives and employee stock options.

Multimedia
Slideshow
See the regional audio slideshow by the author.
Contact
Global Economic Prospects

1818 H Street, N.W. Washington, DC 20433 USA

Email GEP
STAY CONNECTED