World Bank maintains 2017 East Asia growth view, sees central bank policy risks

[SINGAPORE] The World Bank kept its 2017 economic growth forecast for developing East Asia and the Pacific unchanged, but added the region is vulnerable to any sharp slowdown in global trade or tightening in financial conditions.

The Washington-based lender expects the developing East Asia and Pacific (EAP) region, which includes China, to grow 6.2 per cent in 2017, slowing from 6.4 per cent growth last year. It sees growth slowing further to 6.1 per cent in 2018, compared with its previous forecast in October of 6.0 per cent growth.

"Growth in developing East Asia and Pacific is expected to remain resilient, as continued buoyancy in domestic demand, including public and increasingly private investment, is supported by strengthening external demand," the World Bank said in its latest East Asia and Pacific Economic Update report on Thursday. "Nevertheless, global and regional vulnerabilities mean that the positive prospects for growth and poverty reduction in the region in this base case are subject to significant risks."

The World Bank kept its 2017 and 2018 growth forecasts for China unchanged at 6.5 per cent and 6.3 per cent, respectively.

It said countries in the region may need to adjust their accommodative monetary policies as upward pressure on consumer prices could intensify on the back of a pick-up in producer prices and projected recovery in commodity prices.

The monetary easing cycle in Indonesia likely needs to be placed on hold, and in the Philippines, policies must be ready to adjust to rising inflationary pressures, the World Bank said.

Additionally, any sharp slowdown in global trade or in China could pose risks to the region's growth outlook.

"Significant slowdowns in world trade, whether stemming from mounting global protectionist pressures or from unanticipated weakness in global activity, could adversely affect most of the region," it said.

The World Bank added that the region's resilience could be tested if global financial conditions tighten faster than expected at a time when the United States is normalising its monetary policy.

REUTERS