The World Bank
East Asia & Pacific Region
East Asia set to grow by 6 percent in 2005;
Thailand to grow by 5.2 percent
In Thailand, the focus is on improving competitiveness, growing the economy
BANGKOK, April 27, 2005 - East Asia’s emerging economies are projected to grow by
6 percent this year, as policy makers face the delicate challenge of responding to a
reduced pace of global trade expansion -- especially in electronics -- slowing growth in
China, higher oil prices, and large dollar inflows to the region, according to the latest East
Asia and Pacific Regional Update, the World Bank’s twice-yearly look at the region’s
economies.
Despite the horrendous loss of life, the Regional Update notes the December 26 tsunami
is expected to have a minor impact on overall economic growth in the two most seriously
affected East Asian economies, Indonesia and Thailand. The 6 percent forecast growth
for emerging East Asia, which includes the tsunami-affected countries, is slightly down
from last year’s cyclical peak of 7.2 percent, but should be more sustainable, with
balanced contributions from exports, consumer spending, and investment.
"What is clear is that this kind of sustainable growth has the potential to bring poverty
rates in developing East Asia down by as much as 5 or 6 percent, amounting to about 35
million people a year," said Jemal-ud-din Kassum, Regional Vice President for East
Asia and Pacific. We are seeing substantial reductions in poverty rates in China,
Vietnam, Indonesia, and Thailand, and income gains in rural and urban areas, which are
very promising. This is especially important as the world is focused this year on
accelerating progress on the goal of halving extreme poverty by the year 2015.
Much of the region’s expansion has been bolstered by robust global and regional demand
growth, supported by low real interest rates. However, uneven growth across countries is
also associated with the emergence of some sizable imbalances in the world economy,
including rising oil prices and skewed balance of payments’ positions.
Need for smart choices
Foreign exchange reserves in emerging East Asia increased by over $300 billion in 2004,
equivalent of over 9 percent of its gross domestic product (GDP), an unprecedented
number.
"What we are seeing is an unusual situation where East Asian economies have large
current account surpluses and large inflows of private capital at the same time, so dollars
are being accumulated even faster than during the mid-1990’s," said Homi Kharas,
Chief Economist for East Asia and Pacific. "Policy makers will need to make some
smart choices to manage these flows. In China, the authorities will need to find a way to
make domestic assets more expensive for foreigners. In other countries, there is room to
expand investment and consumption to counter slowing world demand."
Global imbalances make it likely that more structural reforms will be needed in the
region. This will be easier to implement because, in most countries, banks, companies,
governments and households have strong financial positions thanks to rapid growth since
2001.
"It’s important for governments to take advantage of this period of high growth to
strengthen the financial sector and the capital markets since these are the institutions that
channel foreign capital into the domestic economy," Milan Brahmbhatt, the principal
author of the report, said.
China continues its expansion
China continues to expand at a rapid pace, recording 9.5 percent growth in 2004.
Investment in China has reached a record estimate of 45 percent of GDP, as the Chinese
authorities continue to take measures to cool down the economy, including a small rise in
interest rates.
"China has already benefited from this year’s expiration of garment quotas which had
previously favored smaller nations. This means China will have an even more difficult
time reducing its trade surplus in the short term, and smaller countries are having to
review their export strategies," said Brahmbhatt.
Women playing greater role in region’s economy
In a special focus section of the report on the state of gender equality in the region ten
years after the Beijing Summit for Women, the report notes that many countries have
improved women’s and girls’ access to healthcare services and education. Women are
playing a greater role in the economy, but not without risks as the majority of women
workers are in the informal sector. Twenty million Asian migrant workers, many of them
women, worked outside their home countries in 2000 – the same year that migrant
workers sent home $6 billion to the Philippines, and $1 billion to Indonesia. The
contribution of women has played a key role in supporting economic and social stability,
and making economies more resilient to change.
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The Regional Update is produced twice a year by the World Bank’s East Asia and Pacific Region. The full
report, plus a Special Focus section, entitled “Gender Equality in East Asia: Progress, and the Challenges of
Economic Growth and Political Change” as well as data tables and individual country reports, will be
available at 4:00 a.m. UTC on April 27, on the World Bank's East Asia page:
www.worldbank.org/eapupdate.