-As World Bank IMF Set for Spring Summit
By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-The World Bank Monday projected a regional economic growth that will ease to 7.6 percent (7.6%) in 2014 from 7.8% in 2013 as its sets with the International Monetary Fund (IMF) for its annual spring meeting.
The World Bank in its latest analysis of the regional economy and made available to InvestAdvocate says that as the global economy recovers, it projects that regional growth will rise moderately to 7.8% in 2013 and ease to 7.6% in 2014.
According to the report, driven by strong domestic demand, economies of developing East Asia and Pacific continue to be an engine of global growth, growing at 7.5% in 2012 higher than any other region in the world.
It however warned that as strong domestic demand drives increasing growth in East Asia and the Pacific region, a few large economies need to watch for possible overheating.
“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†the report affirmed.
Axel van Trotsenburg, World Bank East Asia and Pacific Vice President said the East Asia and Pacific region contributed around 40% 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†van Trotsenburg said.
According to the report, fiscal and monetary policies to boost consumption and investment helped sustain growth in 2012 across the region, with middle-income countries performing particularly well. “Developing economies excluding China grew 6.2% in 2012, up from 4.5% in 2011†the report said.
The World Bank says risks emanating from the Eurozone and the U.S. have declined since the middle of last year. The World Bank’s baseline projections for global growth are for a modest expansion of 2.4% in 2013 and a gradual strengthening to 3.0% in 2014.
“While still fragile, there are signs of a turnaround in real activity in high income economies, thus external demand for the East Asia and Pacific region’s exports will stabilise this year. The most recent numbers on industrial production and producer’s expectations confirm continued solid growth†says the report.
Similarly, Bert Hofman, World Bank’s East Asia and Pacific Chief Economists said most countries in developing East Asia are well prepared to absorb external shocks, but continued demand-boosting measures may now be counterproductive, as it could add to inflationary pressures.
“A strong rebound in capital inflows to the region induced by protracted rounds of quantitative easing in the U.S., EU and Japan, may amplify credit and asset price risks†Hofman said.
He said in East Asia and the Pacific, overall economic management has been effective in dealing with the global economic crisis, which has enabled the region to remain resilient and sustain growth.
The East Asia and Pacific World Bank Chief Economists challenged policy makers in the region to now build on its strengths and address short and long term challenges with smart policies, such as the need to continue to be vigilant to react to shocks in the world economy and be prepared to withdraw stimulus as the world economy recovers.
He advised countries that show some signs of inflationary pressures, 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†he said.
Hofman further advised most countries could increase productive capacity by investing in infrastructure and human capital, and thus pave the way for continued high and equitable growth.
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