Tuesday, November 14th, 2006

East Asia Posts Solid Growth While Bracing for Global Downturn

WB East Asia Update launched via GDLN

The World Bank’s second East Asia Update for this year, including a special section on “Investing in the Young”, was released on November 14, 2006 via the GDLN. Speakers at Bank Headquarters in Washington DC connected with regional sites in Dili, Port Moresby, Ulan Bator, Sydney, Beijing, Manila and the TDLC, allowing over 100 participants to join a question and answer session with the authors of the report.

The new Regional Vice President for East Asia Pacific (EAP) Mr. James Adams moderated the session, and the Update was presented by Mr.Homi Kharas, Bank Chief Economist for EAP, Mr. Milan Brahmbatt, Lead Economist for East Asia PREM and author of the report, as well as Mr. Emmanuel Jimenez, Sector Director for Human Development.

According to the Update, East Asian economies are expected to register their fifth consecutive year of strong growth in 2006, backed up by a substantial decline in poverty. But on the horizon, growth rates in Transition Economies and Newly Industrialized Economies are expected to slow, reflecting a likely weakening in US growth in 2007 and a consequent drop in exports from East Asia.

The center of attention in East Asia, China, with a growth rate of more than 10 percent, is underpinning the region’s overall GDP growth. Strong export growth has been a common feature sustaining activity throughout the region. However, domestic consumption and investment performance has been much more varied, reflecting the impact of higher oil prices and higher domestic interest rates in the first half of 2006. Improved public finances and lower public debt also provides the fiscal space for higher public spending, if required, especially in infrastructure and social services.

On longer term trends, the presenters noted that East Asia is increasingly a middle-income region, which poses new tensions. Mr.Kharas noted that inequality in much of developing East Asia has risen, not just in income levels, but also in schooling and access to basic services. “This pattern of economic growth highlights the need for a different strategy to invest in human capital”.

Mr. Jimenez elaborated on this report’s focus on youth in the region, pointing out that while East Asia had succeeded in providing opportunities for primary education, there was a need to examine curricula at higher levels to better prepare youth when they enter the work force in a dynamic economy.