The World Bank cut its 2013 growth forecast for East Asia’s developing countries on Monday, reflecting regional powerhouse China’s slowdown plus the looming end of the United States’ cheap-money stimulus policy.
The international lender said it expects the region’s emerging economies to grow by an average of 6% this year, down from its April prediction of 6.5%.
China was forecast to expand by 7.5%, lower than the 8.3% April outlook. The world’s second-largest economy’s rapid acceleration is slowing as it shifts to an economy driven by its own consumers instead of mostly exports, and growth hit a two-decade low in the second quarter.
Other developing Asian economies have been hit by weaker demand, plus worries that the US will pull back its loose monetary policy that has poured funds into emerging markets.
Lower global commodity prices and weaker-than-expected export growth have also slowed growth in larger middle-income countries including Indonesia, Malaysia and Thailand, the World Bank economic update said. The Philippines, though, was forecast to continue its surge of the past two years with a forecast expansion of 7%, nearly double the rate of two years ago.
Asia’s developing economies may get a boost now that growth is finally picking up in the US, Europe and Japan, traditionally their biggest export biggest markets.
“We are seeing a slowdown in domestic demand, which is a headwind, but at the same time Asia is seeing a tailwind from the revival of the rest of the global economy,” said Bert Hofman, the World Bank’s chief economist for East Asia and the Pacific.
Many emerging economies are also bracing for the US Federal Reserve policymakers’ eventual wind-down of its unprecedented monetary stimulus programme.