East Asia Pacific Economic Update, April 2014 -
Preserving Stability and Promoting Growth
- Developing countries in the East Asia Pacific region will see stable economic growth this year, at 7.1 percent, largely unchanged from 2013.
- While growth is down from the average rate of 8.0 percent from 2009 to 2013, East Asia remains the fastest growing region in the world.
- In China, growth will ease slightly, to 7.6 percent this year from 7.7 in 2013.
- Excluding China, the developing region will grow by 5.0 percent, slightly down from 5.2 percent in 2013.
Main factors supporting growth
- The region’s growth is bolstered by a recovery in high-income economies and the market’s modest response so far to the Federal Reserve’s tapering of its quantitative easing.
- Flexible currencies will help East Asia deal with external shocks, including potential capital-flow reversals.
- Most countries have adequate reserves to cover temporary trade and external shocks.
Structural reforms key to long-term growth
- Over the longer term, structural reform can increase developing East Asia’s underlying growth potential and enhance market confidence.
- China has already begun a series of structural reforms in finance, market access, labor mobility and fiscal policy to increase efficiency of growth and boost domestic demand.
- Successful reforms in China could bring considerable benefits to trade partners supplying it with agricultural products, consumption goods and modern services. Conversely, spillovers from a disorderly rebalancing in China could hurt regional and global growth, especially in countries relying on natural resource exports.
- The rest of the region’s developing countries could also benefit from structural reforms, such as facilitating international trade and promoting foreign direct investment, especially in the services sector.