Tokyo: East Asia’s economies will expand at the slowest pace in four years in 2007 as domestic consumption is not enough to compensate for easing demand for exports in most of the region, the World Bank said.
East Asia, which excludes Japan and the Indian subcontinent, will grow 7.3% this year, slowing from an 8.1% expansion in 2006 which was the quickest in the past decade, the Washington-based lender said.
It kept its forecast for this year unchanged from a November estimate, while predicting another deceleration in the region’s economies to 7.1% in 2008.
“The emerging US downturn and slowing export growth are the main factors behind the forecast easing in emerging East Asian growth in 2007,” the bank said in a twice-yearly report on the region.
“Another area of uncertainty is the extent to which domestic demand in the East Asian economies outside China will be able to pick up slack from slowing exports.”
Asia’s developing economies are almost twice as reliant on exports as the rest of the world, with 60% of their overseas sales ultimately destined for the US, Europe and Japan.
Rising oil prices may spur inflation, hurting consumer spending in the region, which is trying to reduce dependence on export-led growth to make expansion more self-sustaining.
“We’re expecting a modest slowdown,” the World Bank’s leading economist for Asia and the Pacific said. “That’s largely being driven, in our expectations, on slower exports and that’s associated with slower growth in the US economy.”