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By APD writer Melo M. Acuña
**MANILA, Oct. 10 (APD) – **The World Bank today said growth in developing East Asian and Pacific economies slowed to 6.0 percent year-on-year in the first semester of 2019 from 6.5 percent during the first half of 2018 which reflects a broad-based decline in export growth and manufacturing activity.
In a statement datelined Bangkok and furnished newsmen in Manila today, World Bank attributed the decline to the weakening global demand, including from China, and the heightened uncertainty brought about by the US-China trade tensions which led to a decline in both exports and investment growth, testing the resilience of the region. This was how the report entitled Weathering Growth Risks in its October 2019 edition of the World Bank’s East Asia and Pacific Economic update looks at current trends. The report was released today.
In the region, excluding China, consumption growth remained steady, although slightly lower than the same period last year, supported by monetary and fiscal policies. Meanwhile, growth in smaller economies of the region, remained robust, reflecting country-specific circumstances including steady growth in the tourism, real estate, and extractive sectors.
World Bank Vice President for East Asia and the Pacific Victoria Kwakwa said as growth slows, “so does the rate of poverty reduction.”
“We now estimate that almost a quarter of the population of developing East Asia and the Pacific lives below the upper-middle-income poverty line of US$5.50 a day. This includes nearly 7 million more people than we projected in April, when regional growth was looking more robust,” she explained.
The report was clear that increasing trade tensions pose a long-term threat to regional growth. While other countries have hoped to benefit from a reconfiguration of the global trade landscape, the inflexibility of global value chains limits the upside for countries in the region in the near term.
“While companies are searching for ways to avoid tariffs, it will be difficult for countries in developing East Asia and the Pacific to replace China’s role in global value chains in the short-term due to inadequate infrastructure and small scales of production,” thus said Andrew Mason, World Bank Lead Economist for East Asia and the Pacific.
The same report warns that downside risks to the region’s growth prospects have intensified. Prolonged trade tensions between China and the United States would continue to hurt investment growth, with high levels of uncertainty. A faster-than-expected slowdown in China, the Euro Area and the United States as well as a disorderly Brexit, will further weaken the external demand for the region’s exports.
World Bank further said high and rising debt levels in some countries are also putting limits to their abilities to use fiscal and monetary policies to ease the impacts of the slowdown. In addition, abrupt changes in global financial conditions may translate into higher borrowing costs for the region which will dampen credit growth and further affecting private investment and economic growth in the region.
To tempter growing risks, the World Bank report recommends that countries with enough policy space use fiscal and or its monetary measures to help stimulate their economies while securing fiscal and debt sustainability. Countries in the region will also benefit from staying the course on trade openness and through deepening regional trade integration.
The continuing US-China trade dispute with slowing global growth will increase the need for countries in the region to do reforms to improve their productivity and boost growth. This includes regulatory reforms that will improve the trade and investment climate to attract investment and ease the movement of goods, technology and know-how, the World Bank statement concluded.
(ASIA PACIFIC DAILY)
