'Developing East Asia' to remain fastest growing in world: World Bank

Recovery in high income countries, stronger global growth to drive region

Developing East Asia is expected to grow by 7.1 per cent this year (2014) and continue to be the fastest growing region in the world, the World Bank said here on Monday. The regional grouping includes China and thirteen developing countries in the region, but excludes Singapore. The regional growth will be led by China's 7.6 per cent while most developing economies are expected to grow around 5 per cent.

The stable economic growth in the region this year will be bolstered by a recovery in high-income economies, the report titled 'East Asia Pacific Economic Update' added. The market's modest response so far to the Federal Reserve's tapering of its quantitative easing is also likely to help and "the tailwinds from improving global trade will offset the headwinds from the tightening of global financial markets," the report said.

"East Asia Pacific has served as the world's main growth engine since the global financial crisis," said Axel van Trotsenburg, World Bank East Asia and Pacific Regional Vice-President. "Stronger global growth this year will help the region expand at a relatively steady pace while adjusting to tighter global financial conditions."

According to the bank, larger Southeast Asian economies, such as Indonesia and Thailand, will face tougher global financial conditions and higher levels of household debt. Malaysia's growth will accelerate modestly, to 4.9 per cent in 2014. Its exports will increase, but higher debt servicing costs and ongoing fiscal consolidation will weigh on domestic demand. In the Philippines, growth could slow to 6.6 per cent, but accelerating reconstruction spending would offset the drag on consumption from the effects of natural disasters in 2013.

The rising exports from the Mekong 4 countries -Cambodia, Lao PDR, Myanmar and Vietnam - is seen as another key positive. "Their exports have grown at 19 per cent annually, exceeding even the performance of China. Given their low wages, favourable demography, and advantageous geography, they have managed to attract significant new investments in sectors such as garments and leather, and in the case of Vietnam, increasingly in electronics and telecommunications. In contrast to the strong performance of the EAP countries, many developed countries saw their share in global exports tumble," the update said.

The growth rate, which is same as 2013, is a sharp fall from the average growth rate of 8.0 per cent from 2009 to 2013. In China, growth will ease slightly, to 7.6 per cent this year from 7.7 per cent in 2013. Excluding China, the developing countries in the region will grow by 5.0 per cent, slightly down from 5.2 per cent last year, the bank said. The bank has factored in a world growth rate of 3 per cent. The richer countries are expected to grow at 2.1 per cent and developing countries at 5 per cent.