World Bank: East Asia will grow a slower 5.3pc

TOKYO: East Asian economies are far better prepared to tackle the latest financial turmoil than they were during their own crisis a decade earlier, but they still face growing dangers as the global slump deepens, the World Bank said yesterday.

The bank praised the region's policymakers for reacting promptly to the crisis, saying the moves should help East Asia stabilise global economic growth.

Amid falling exports and slowing business investment, real gross domestic product growth in East Asia - a region that includes China but excludes Japan - will slow to 5.3 per cent in 2009 from an expected seven per cent this year, the bank estimated in a new regional report. Six months ago, the Bank forecast East Asian growth next year to reach 7.4 per cent.

The developed economies of the US, euro zone and Japan are all projected to contract in the coming year.

Vikram Nehru, the World Bank's chief economist for East Asia and the Pacific, warned that with conditions changing so quickly, the outlook for the region could easily worsen.

"We are in unknown territory at this stage," Nehru said. "This is not something the world has seen in a very long time."

Despite the slowdown, East Asia will contribute about a third of total global growth in 2008, according to the World Bank.

"Thanks to the quick action of policymakers from virtually every East Asian country, banking systems have been able to deal with the crisis so far and in a number of countries, economic stimulus packages are being put in place," said Jim Adams, World Bank vice president for the East Asia and Pacific region, in a statement. "These actions are helping East Asia continue to play a key stabilising role and act as a growth pole for the global economy."

Central banks throughout East Asia have responded aggressively since September by introducing various monetary measures, including liquidity injections and interest rate cuts.

Individual governments are now following up on the fiscal front, with China, South Korea, Malaysia and Thailand announcing major economic stimulus steps.

China's US$586 billion (US$1 = RM3.62) package "underlies the authorities' efforts to reduce reliance on external demand and rebalance the economy toward less capital- and energy-intensive growth and more environmentally sustainable investments," the bank said.

The region has managed to hold its own so far largely through reforms made in the wake of the Asian financial crisis of 1997-98, the bank said. Public finances, external balances and corporate balance sheets are more sound due to to smarter macroeconomic policies, tighter bank supervision and better risk management systems.

"These countries clearly have taken to heart the lessons of the 1998 East Asian financial crisis." Nehru said. "But virtually every country has been affected whether they entered well positioned or not." - AP