East Asia Pacific Economic Update, April 2016: Growing Challenges


Key findings
  • Growth in Developing East Asia and Pacific has remained resilient and is expected to ease only modestly, from 6.5% in 2015 to 6.3% in 2016 and 6.2% in 2017-18.
  • The forecast reflects China’s gradual shift to slower, more sustainable growth, expected to be 6.7% in 2016 and 6.5% in 2017, compared with 6.9% in 2015.
  • This outlook is subject to elevated risks and countries should continue to prioritize monetary and fiscal policies that reduce vulnerabilities and strengthen credibility, while deepening structural reforms.
  • East Asia and Pacific accounted for almost two-fifths of global growth in 2015, more than twice the combined contribution of all other developing regions.
  • The region has benefited from careful macroeconomic policies, including efforts to boost revenue in commodity-exporting countries. But sustaining growth amid challenging global conditions will require continued progress on structural reforms.
  • The region’s growth prospects faces a challenging backdrop: slow growth in high-income countries, a broad slowdown across emerging markets, weak global trade, persistently low commodity prices, and increasingly volatile global financial markets.
  • Not including China, the region’s developing countries grew by 4.7% in 2015, and the pace of growth will pick up slightly — to 4.8% in 2016 and 4.9% in 2017-18 — driven by growth in the large Southeast Asian economies.
  • The outlook for individual countries varies, depending on their trade and financial relationships with high-income economies and China, as well as their dependence on commodity exports.
  • The Philippines and Vietnam have the strongest growth prospects, both expected to grow by more than 6% in 2016. In Indonesia, growth is forecast at 5.1% in 2016 and 5.3% in 2017, contingent on the success of recent reforms and implementation of an ambitious public investment program.
  • Several small economies, including Lao PDR, Mongolia, and Papua New Guinea, will continue to be affected by low commodity prices and weaker external demand. In the Pacific Island Countries, growth is likely to remain moderate.
  • Countries should adopt monetary and fiscal policies that reduce their exposure to global and regional risks, and continue with structural reforms to boost productivity and promote inclusive growth.
  • Slower-than-expected global growth could weaken demand and reduce growth in developing East Asia and Pacific, especially among commodity exporters.
  • The report calls for close monitoring of economic vulnerabilities, continued macroeconomic prudence and sustained structural reform.
  • In China, it recommends strengthening market discipline in the financial sector, gradually opening up sectors dominated by state-owned enterprises to greater competition, and continuing to reform the household-registration system.
  • Over the longer term, the report calls for governments to boost transparency and strengthen accountability. It urges countries to reduce barriers to regional trade, such as non-tariff measures and regulatory barriers, including to trade in services.
  • And the report stresses that the benefits from the digital revolution will be maximized by developing regulatory regimes that favor competition, and by helping workers adapt their skills to the demands of the new economy.