East Asia economies remains robust despite US slow down
15 Nov '07
4 min read
East Asian economies are likely to remain robust in 2008 despite growing concerns about the U.S. sub-prime crisis and increasing global oil prices, says the World Bank's latest East Asia & Pacific Update –Will Resilience Overcome Risk? Highlighting this, the report finds that for the first time, the number of poor people living below $2 a day in East Asia has fallen below 500 million – down from 1 billion in 1990.
The Update – a six-monthly report on the region's economic and social health – finds that growth in emerging East Asia is expected to exceed 8 percent in 2007 for a second year in a row and to moderate only slightly in 2008. Although East Asian exports to the US have already slowed, more buoyant investment and consumption in China and other countries have allowed growth to remain strong and even pick up this year.
China is expected to grow by 11.3 percent in 2007 and that is expected to slow only modestly to 10.8 percent in 2008. The stronger growth dynamic extends to middle-income economies in South East Asia and continues to run at solid 7 percent to 10 percent rates in low-income economies of the region including Cambodia, Lao PDR, Mongolia and Vietnam.
Growth is also running at above historical trends in some of the small Pacific Island economies due to high commodity prices although social tensions and political instability continue to undermine performance in some of these countries.
The Update cautions that new highs foroil prices will test the solidity of the East Asian and global economic expansions in 2008. Crude oil prices have moved to well over $90 in early November, underpinned by demand and supply factors. Although rising prices have curbed demand growth in developed countries, demand in developing countries continues to grow by 3-4 percent year.
The report calculates that an average oil price of $90 in 2008 would be associated with an income loss in East Asia of a little over 1 percent of GDP, although that would be similar to the additional annual costs of higher oil prices that the region has already experienced over the last 3-4 years.
“The impact of the US sub-prime crisis and the renewed surge in oil prices, have clearly increased downside risks,” said Milan Brahmbhatt, the report's lead author. “Nevertheless we expect that the stronger growth momentum in the region to carry through 2008.”
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