World Bank sticks to 8% growth forecast for East Asia
2011-03-21 18:20:22
The World Bank is sticking to its forecast of around 8 per cent real GDP growth for East Asia this year, down from 9.6 per cent last year, despite the impact of the recent earthquake and tsunami in Japan.
The bank said that near-term economic expansion is likely to be temporarily affected by the disaster in Japan, but growth will likely see a rebound after reconstruction begins.
There are concerns, however, that a strong Japanese currency could make debt servicing more expensive for some East Asian nations.
The World Bank Conference on East Asian Development started in Singapore on Monday with a minute of silence being observed in memory of those killed in the tragic earthquake and tsunami that hit Japan on March 11.
While attendees were anxious to get a grip on the impact of the disaster on the region's economy, the World Bank stressed that the impact on the East Asian region was likely to be short-lived.
The lender said any impact in the immediate future would be on the terms of trade and finance.
Commodity prices, which are rising because of the Libyan crisis, are a bigger worry, it added.
Vikram Nehru, chief economist, East Asia & The Pacific Region, The World Bank, said: "I do dare say there might be an increase in commodity prices as a result of some of this increased demand, which is going to interact with the problems in the Middle East, which has had an impact on oil prices as well as the continuing large demand that's occurring from China's rapid growth."
The Bank also pointed to the region's long-term debt, one quarter of which is denominated in Japanese yen.
The rapidly strengthening yen, which rose as high as 76 against the US dollar last week, could make debt servicing more expensive for some countries.
The World Bank estimates that a one per cent appreciation of the yen would mean a US$250 million increase in the annual debt servicing burden for East Asia's developing nations.
Countries in the region have different levels of Japanese yen debts, ranging from 8 per cent in China to 60 per cent in Thailand.
ASEAN Secretary General Surin Pitsuwan said: "All of us are concerned about that, and that's not only East Asia or South East Asia - but the global community is concerned if the yen is allowed to appreciate too much too quickly, it will certainly derail economic growth across the globe."
The ASEAN secretary general welcomed the intervention of the G7 countries in global currency markets to push down the value of the yen, but he added that the situation will require continuous monitoring in the near term.