East Asia Pacific Economic Update, April 2018: Enhancing Potential

Photo: Achmad/World Bank

Growth in developing East Asia and Pacific (EAP) is expected to remain strong and reach 6.3 percent in 2018, according to the latest World Bank regional economic forecast.

  • Prospects for a continued broad-based global recovery and robust domestic demand underpin this positive outlook. Still, emerging risks to stability and sustained growth require close attention.
  • After growing faster than anticipated in 2017, China is expected to slow moderately to 6.5 percent in 2018 as its economy continues to rebalance away from investment and towards domestic consumption with policies that focus more on slowing credit expansion and improving the quality of growth.
  • Excluding China, growth in developing EAP is expected to remain stable in 2018 at 5.4 percent, reflecting continued robust domestic and external demand.
  • Even with favorable prospects, policy makers in the region are advised to attend to the short-term risks associated with a faster-than-expected rise in interest rates in advanced economies and possible escalation of trade tensions.
  • To address risks to macroeconomic stability, countries will need to consider tightening monetary policies, further strengthening macroprudential regulation, and building fiscal buffers.
  • To reverse moderating growth prospects across the region in the medium term, countries will need to find ways of raising their long-term potential growth, including:
    - Improving public spending and infrastructure provision;
    - Deepening trade integration and improving trade facilitation;
    - Implementing reforms to enhance competitiveness; and
    - Building human capital.
  • With continued threats to the global trading system, developing EAP can respond by deepening its own trade integration and facilitation, through such mechanisms as the ASEAN Economic Community, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the Belt & Road Initiative. These measures will be even more important as countries adapt their manufacturing-led development strategies to the emerging challenges of labor saving technologies and automation.
  • Improving competitiveness through reforming the business environment will be important for countries in the region as they seek to adjust to the ongoing changes in the manufacturing landscape with the evolution of technology.
  • As technologies continue to evolve, basic numeracy and literacy and familiarity with digital technology will be essential. In this regard, improving the effectiveness of schools and education systems is a priority in many countries in the region where most students are in school but many are not learning.
  • Strengthened social assistance, insurance programs and increased resilience to systemic shocks will be key to ensure the economically insecure are not left behind.
  • Economic resilience is particularly important in the Pacific Island Countries, and can be helped by building up sovereign wealth funds as well as improving access to temporary migration schemes.