Photo for illustrationHowever, the region still faces significant risks to growth, and countries need to take measures to reduce financial and fiscal vulnerabilities. Over the longer term, the report recommends that countries address constraints to sustained and inclusive growth, including by filling infrastructure gaps, reducing malnutrition and promoting financial inclusion.
The newly released East Asia and Pacific Economic Update expects developing East Asia to grow at 5.8 percent in 2016 and 5.7 percent in 2017-2018.
For China, the nation continues its gradual transition to slower, but more sustainable, growth, from 6.7 percent this year to 6.5 percent in 2017 and 6.3 percent in 2018. In the rest of the region, growth is projected to remain stable at 4.8 percent this year, and rise to 5 percent in 2017 and 5.1 percent in 2018.
“The outlook for developing East Asia and Pacific remains positive, with weakness in global growth and external demand offset by robust domestic consumption and investment. The long-term challenge is to sustain growth and make it more inclusive, including by shrinking gaps in income and access to public services, especially in China; improving infrastructure across the rest of the region; reducing persistent child malnutrition; and harnessing the potential of technology to stimulate financial inclusion”, said Ms Victoria Kwakwa, World Bank Vice President for East Asia and Pacific.
Amidst slower global growth, Vietnam’s economy has proven resilient. Economic activity in Vietnam moderated somewhat in the first three quarters of 2016, due to the impact of a severe drought on agricultural production and slower industrial growth. But macroeconomic stability has been maintained and inflationary pressures remain subdued.
While Vietnam continues to reduce poverty, the decline in agriculture poses short-term risks. The livelihood of households that rely on agriculture for income are particularly vulnerable. For the medium-term, the outlook remains positive.
But easing macroeconomic vulnerabilities and sustaining higher medium-term growth would need a bolder implementation of structural, fiscal and banking sector reforms.
The report also expects domestic demand to remain robust across much of the region. Continued low commodity prices will benefit commodity importers and keep inflation low across most of the region.
According to Sudhir Shetty, Chief Economist of the World Bank’s East Asia and Pacific Region, despite the favorable prospects, the region’s growth is subject to significant risks. A sharp global financial tightening, a further slowdown in world growth or a faster-than-anticipated slowdown in China would test East Asia’s resilience.
Policymakers are urged to address widespread malnutrition. High levels of childhood undernutrition persist in many countries, even relatively affluent ones, and lead to health and cognitive deficits that are difficult to reverse./.