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World Bank Cuts Asia Growth Projections, Calls for Reform

© Flickr / Shiny ThingsThe World Bank has decreased its growth forecast for the developing East Asia and Pacific (EAP) region Monday
The World Bank has decreased its growth forecast for the developing East Asia and Pacific (EAP) region Monday - Sputnik International
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The World Bank has decreased its growth forecast for the developing East Asia and Pacific (EAP) region Monday and has called for local governments to improve the investment appeal of their nations, as well as boost exports.

MOSCOW, October 6 (RIA Novosti) - The World Bank has trimmed its growth projections in the developing nations of East Asia and Pacific for this year and the next two as China’s economy continues to slow down as tighter monetary conditions and a stronger US dollar are imposing limitations of the expansion of international trade in the region.  However, despite the lowered forecast, the EAP region is still growing at the fastest pace in the world, the World Bank says.

The Washington-based financial institution expects the EAP to expand 6.9% this year and next, less than the previously estimated 7.1%. In 2016 the region is expected to grow by 6.8%, down from earlier figure of 7.1%. The World Bank highlighted possible risks to the growth outlook as the slow recovery in international trade and the rise in global interest rates.

China’s economic growth will slow down to 7.4% this year from a previous estimate of 7.6%, missing the Beijing's government earlier growth target of 7.5%. In 2015, the World Bank predicts, China’s growth will further slow to 7.2% and to 7.1% in 2016. The key factors behind the slowing pace of China’s economy are the Beijing’s attempts to manage the excessive  debt of the local regions their efforts to restrain the shadow banking sector, decreasing competitiveness in manufacturing, high energy consumption and high levels of environment pollution, says the World Bank.The East Asia Pacific “will continue to have the potential to grow at a higher rate — and faster than other developing regions — if policy makers implement an ambitious domestic reform agenda”, the Bank’s Vice-President Axel van Trotsenburg said in a statement as quoted by Associated Press.

The World Bank raised its growth outlook for Malaysia to 5.7% from the earlier estimates of 4.9% after the country substantially increased its exports in the first half of the year. The boost of export shipments helped the Malaysian economy accelerate, thus, other nations in the region should expand their exports, the World Bank says. Among the nations “well positioned” for such expansion are China, Vietnam, Malaysia and Cambodia.

The world economy is heading for recovery, the World Bank says, with an estimated 2.6% annualized growth this year, and 3.3% in 2015 and 2016, as reported by Businessweek. However, global recovery is advancing at an uneven pace, and there is still a lot of uncertainty in developed nations’ policies and their timing. The US Federal Reserve, who has planned to complete tapering of QE this year, is expected  to start raising interest rates sometime in 2015, possibly triggering further capital outflows from developed markets. “In this uncertain global environment, there is still a window of opportunity to enact critical, and in some cases overdue, reforms,” the World Bank says as quoted by Businessweek. Among the reforms they suggest, are increased infrastructure and logistical investment, the liberalization of services and investment regulations, and structural reforms needed to boost export competitiveness.

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