World Bank: Developing East Asia and Pacific is an Engine of Global Growth

According to World Bank East Asia and Pacific Vice President Axel van Trotsenburg: "The East Asia and Pacific region contributed around 40 percent of global growth in 2012, and the global economy continues to rely on the region’s growth, with investor confidence surging and financial markets remaining solid. Now is the time for countries to focus on helping the remaining poor, with more and better quality investments to accelerate inclusive growth.”

Growth across the region in 2012 was sustained by fiscal and monetary policies to support consumption and investment. Particularly the region's middle-income countries performed well. Developing economies excluding China - of which economic growth was reported to have slowed down to 7.8 percent in 2012 due to re-balancing efforts - expanded 6.2 percent in 2012, up from 4.5 percent in 2011.

Real disposable income of China's urban households rose more than nine percent, supporting household consumption, which contributed 4.4 percentage points to the country's GDP growth. China is estimated to grow 8.3 percent in 2013 and 8.0 percent in 2014.

The World Bank projects global growth at 2.4 percent in 2013 and 3.0 percent in 2014. Despite ongoing turmoil in the Eurozone and United Stated. As such, external demand for the East Asia and Pacific region’s exports will increase as can be seen in recent numbers of industrial production and producer’s expectations.

Short term trade and investment flows in the region can become affected by movements in high-income country currencies (for example Japan's yen). This implies that "some countries, notably suppliers of parts to Japanese industry and countries with considerable Japanese investment could gain, whereas countries that compete directly with Japan in third markets may face some headwind in the short run." However, sustained growth in Japan is regarded as benefiting the region as a whole.

The World Bank report also notes that "as the global economy recovers, an emerging issue is the risk of overheating in some of the larger economies. The latest numbers suggest that, if global demand continues to revive, some major economies may reach the limits of their current production capacity, as the output gap has closed in those countries."

Although economic management in the region has been effective in fostering economic growth and in dealing with the global crisis, the World Bank advises:

• Policymakers need to continue to be vigilant to react to shocks in the world economy, but be prepared to withdraw stimulus as the world economy recovers.  For countries that show some signs of inflationary pressures, it would be a good time to rebuild policy buffers.

• Several countries need to manage strong capital inflows by maintaining an appropriate macro policy mix, sufficient flexibility in the exchange rate and macro-prudential policies.

• Most countries could increase productive capacity by investing in infrastructure and human capital, and thus pave the way for continued high and equitable growth.

Source: World Bank

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