The ongoing eurozone debt crisis could harm the growth of East Asia economy, the World Bank has warned. Moreover, the bank also said that continued disruption could hurt the growth and demand for exports from East Asia.
The Washington-based global financial institution said East Asian countries have to boost their domestic demand to sustain their growth and economy. It also warned that Chinese economic slowdown is a threat to the region’s growth.
“A slowdown China – which comprises 80% of developing East Asia’s gross domestic product – is a drag on growth across much of the region given China’s growing role as an export destination and source of foreign investment. In particular, a slowing in Chinese investment will primarily hurt demand for commodity and capital goods and particularly impact natural resource exporters that are heavily reliant on Chinese demand,” the World Bank said in its latest report.
The bank expects growth to slow down to 7.6%, which is down from 8.2% in 2011. The global demand is also likely to come down due to uncertainty in Europe and downfall of US recovery.
On a positive note, the bank said that East Asian economies are quite balanced and can handle further shocks, but governments should do more to bring down their reliance on trade.
World Bank also reported that people living in East Asia with less than $2 of daily income will decrease by 24 million by end of this year.
“Prospects for East Asia are, as in other developing regions, weighed down by the persistent tepid recovery of US and, most particularly, the uncertainty in Europe. The prospects for growth in developed markets, and the potential impact that a renewed global recession would have on trade and capital flows, has heightened uncertainty about the growth prospects in Europe, Japan and much of East Asia,” the World Bank said in its report.
Excluding China, it expects a positive increase by 5.2% in East Asian countries compared to 4.3% in 2011. However, the bank further warned that if global economy worsens, then growth in the region will drastically slow down.
Sources: BBC News, voanews.com