World Bank Predicts Slower Growth in East Asia and Pacific

China's growth to slow to 7.7% in 2012 but recover next year as stimulus kicks in.

Economic growth in the East Asia and Pacific region may slow down by a full percentage point from 8.2% in 2011 to 7.2% this year, before recovering to 7.6 % in 2013. Growth in developed countries will remain modest, with recovery in the region to be driven mainly by strong domestic demand in developing countries, said the World Bank in its East Asia and Pacific Economic Data Monitor, released today.

The new report says that weak exports and lower investment growth will cut down China's GDP growth from 9.2% in 2011 to 7.7% this year. In 2013, however, China's growth is expected to rebound to 8.1% as the impact of stimulus measures kicks in, supported further by an uptick in global trade.

In September, the Purchasing Managers’ Index showed manufacturing in China continuing to be in contraction with a reading of 49.8.

"The East Asia and Pacific region's share in the global economy has tripled in the last two decades, from 6% to almost 18% today, which underscores the critical importance of this region's continued growth for the rest of the world," said World Bank Group President Jim Yong Kim.

"Even under difficult global circumstances, poverty in the region will continue to decline, with the share of people living on $2 a day expected to reach 24.5% by the end of 2013, down from 28.8% in 2010," said Pamela Cox, World Bank East Asia and Pacific regional vice president. "Weaker demand for East Asia's exports is slowing the regional economy, but compared to other parts of the world, it's still growing strongly, and thriving domestic demand will enable the region's economy to bounce back to 7.6% next year."

The report cites reconstruction spending in Thailand after last year's floods as among the factors buttressing domestic demand in the region. In addition, countries like Indonesia - together with Thailand and Malaysia - are currently enjoying a boom in spending by their governments and the private sector on capital goods.

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