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Strong domestic demand continued to be the engine of growth for development in East Asia and the Pacific, which posted a 7.5 percent growth in 2012 — higher than any other region in the world, the World Bank said on Monday.
In its latest analysis of the regional economy, released in Singapore on Monday, the World Bank said that as the global economy recovers, regional growth will rise moderately to 7.8 percent in 2013 and ease to 7.6 percent in 2014.
“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,” Axel van Trotsenburg, World Bank East Asia and Pacific vice president, said in an official statement from the bank.
“Now is the time for countries to focus on helping the remaining poor, with more and better quality investments to accelerate inclusive growth.”
Fiscal and monetary policies to boost consumption and investment helped sustain growth in 2012 across the region, with middle-income countries performing particularly well, the World Bank report showed.
The World bank forecasts the Thai economy will grow 5.3% this year, up from its 5% prediction in December, with a strong performance next year and economic growth of 5%, up from 4.5% earlier projected.
The bank predicts East Asian and Pacific economies will grow 7.8% this year on robust domestic demand, but it warns countries to guard against overheating in credit and asset prices.
The forecast is up from 7.5% last year, but the bank said in its latest East Asia and Pacific Update report that expansion would then drop to 7.6% next year.
Domestic demand will underpin the rise after the region contributed 40% of global growth last year.
Global risks arising from the eurozone debt crisis and US fiscal showdown have abated and there are signs of an economic turnaround in advanced economies, which bodes well for Asia's exports, the bank added.
However, one emerging issue is "the risk of overheating'' in some of the region's larger economies, it said.
Near-zero interest rates and easy monetary policies in the US, the European Union and Japan have led to a massive exodus of money from these countries into emerging markets, including those in Asia, where they can get higher returns.
The inflow has boosted property and stock prices but there are fears of an asset bubble that could collapse once the funds are withdrawn as quickly as they came in.
Combined with the funds influx, domestic stimulus measures - including low interest rates - implemented by governments to boost demand as exports waned have led to higher levels of debt and inflation.
"Continued demand-boosting measures may now be counter-productive as it could add to inflationary pressure,'' said Bert Hofman, the bank's chief regional economist.
"A strong rebound in capital inflows to the region induced by protracted rounds of quantitative easing in the US, EU and Japan, may amplify credit and asset price risks,'' he added.
Gross capital flows into the region amounted to US$46.8 billion (1,357 billion baht) in the first three months of this year, up 86.3% from a year ago, the bank said.
TAS Offshore Bhd (TAS) has secured new contracts to sell four offshore ships for the oil and gas sector valued about RM160mil.
It said on Monday the contracts were for the sale of two anchor handling tug oil recovery supply vessels and two offshore construction vessels.
"The four vessels were sold to overseas customer. The revenue stream from the contracts is expected to contribute positively to the earnings and assets of TAS Group for financial years ending May 31, 2014 and 2015," said the company.
The World Bank has warned that the Philippines and a few other Asian countries were facing threats of overheating and suggested that policymakers start shifting focus from boosting economies to containing the buildup of inflationary pressures.
“Though the developing economies of East Asia are generally well prepared to absorb external shocks, an emerging concern is the risk of overheating in some of the larger economies,” the World Bank said in its latest outlook report for East Asia and the Pacific released Monday.
The bank said measures previously implemented to fuel economic growth of the concerned countries were now ripe for withdrawal. It explained that robust growth rates could eventually lead to inflationary problems if policies would remain the same.
“Continued demand-boosting measures may now be counterproductive. Countercyclical demand policies have helped sustain growth, but they may now risk stoking inflationary pressures and amplifying the credit and asset price risks that are emerging in the context of strong capital inflows into the region,” the World Bank said in the report.
In the case of the Philippines, the Bangko Sentral ng Pilipinas brought down interest rates to historic lows in 2012 in a bid to accelerate economic growth.
Yesterday in Asia
Asian markets slipped on Monday after a disappointing batch of Chinese growth figures, with traders keeping a wary eye on the Korean peninsula, where military tensions are high.
A pick-up in the yen dragged on Japan’s Nikkei after the United States warned Tokyo to avoid competitive devaluation as the unit faces heavy selling pressure on the back of huge central bank stimulus measures.
Tokyo fell 1.55 percent, or 209.48 points, to 13,275.66, while in the afternoon Hong Kong shed 1.39 percent and Shanghai was 1.09 percent lower.
Sydney finished 0.91 percent, or 45.6 points, lower at 4,967.9 and Seoul eased 0.20 percent, dipping 3.78 points to 1,920.45.
China said its economy grew 7.7 percent in the first quarter of the year.
Shayne Heffernan Ph.D.
Economist/Hedge Fund Manager
Live Trading News
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