On Monday, a report from the World Bank revised projected economic forecasts for the developing nations of East Asia. Key factors in the revised forecast include China’s slowing economic expansion and the tightening of monetary policy in developed nations.
The World Bank growth forecast for China was originally set at 7.6% for this year and 7.5% for 2015 back in April. The latest report has the figures being cut to 7.4% for this year and 7.2% for next year. All of these figures represent a slowing of growth from China’s 7.7% for the year in 2013. The developing countries of East Asia are forecast to see 6.9% growth in 2015, which is down from the earlier projection of 7.1%.
The World Bank’s chief Asian economist, Suhdir Shetty, said that the slowing of economic growth in China is nothing so dramatic that it will have a major impact on the region’s economy as a whole, saying, “China’s slowdown is gradual. It is slower but it’s not the bottom falling out of China’s growth.”
Growth is also expected to slow in South East Asia’s five biggest economies of Indonesia, Thailand, Vietnam, the Philippines and Malaysia. As a whole, these economies are expected to drop from the 5% growth that they saw in 2013 to 4.5% for this year. However, they are expected to rebound in 2015 for an expected growth of 5%.
Shetty of the World Bank stated that the ASEAN five should look forward to an increasing demand for their exports, but that these nations will also need to invest in infrastructure if they hope to sustain the growth into the future.
The greatest risk for these economies going forward will be the tightening of monetary policy in places like the United States, Europe and Japan. The tightening of monetary policy could lead to higher interest rates and reduced cash flow to developing nations that rely on these funds to service their deficits.