The World Bank raised its growth forecast for the developing economies of East Asia and the Pacific today but warned that risks included rising protectionism and escalating tensions over North Korea. In an update to its annual economic outlook, the bank forecast economic growth of 6.4 per cent for the region this year, then easing to 6.2 per cent in 2018. The World Bank said it tweaked its forecasts to reflect stronger than expected growth this year in China Asia’s biggest economy before a gradual slowdown next year.
In its previous forecast in April, the Washington, DC- based lender projected a 6.2 per cent expansion in 2017 and 6.1 per cent for 2018. The report covers 15 countries including China, Thailand, Vietnam, Malaysia and the Philippines. While the outlook is broadly positive, the bank said growing protectionism could chill world trade, citing proposals for changes to the North American Free Trade Agreement that would restrict or discourage imports and increasing uncertainty about access to the British market as Brexit talks get underway.
Furthermore, “geopolitical tensions in the region are rising and could escalate into armed conflict,” the report said, referring to United Nations sanctions on North Korea in response to its nuclear and missile tests. Some world powers are urging even tougher measures, including potential military action, to stop Pyongyang from developing its nuclear capabilities, it said. “Escalation of these disputes could have serious economic consequences,” the World Bank said.
East Asia’s crucial position in global shipping and manufacturing supply chains means flaring tensions could disrupt trade flows and economic activity, it said, adding that the tendency for global investors to pull their money during political crises could pressure exchange rates and raise world interest rates.
Commodity prices could also spike because of worries about supply disruptions, the report said.