Subscribe to our newsletter

World Bank sees Strong Growth from Asia

Asian central banks should closely monitor capital flows, following additional easing measures in major economies, the World Bank said Wednesday, as it tipped the region’s economies to continue strong growth thought at a slower pace than in recent years.

The World Bank forecast growth in East Asia Pacific to pick up to 6.6% in Ys 2013 and 2014, from 5.8% in Y 2012. Its projections for Ys 2012 and 2013 were revised down by 0.5% and 0.4%, respectively, from its view in May.

Developing Asia Pacific is set to expand 7.5% in Y 2012, 7.9% in Y 2013 and 7.6% in Y 2014. China is expected to grow 7.9% in Y 2012, 8.4% in Y 2013 and 8.0% in Y 2014.

Following additional easing measures by the US Federal Reserve aka QE-Infinity, Bank of Japan, and central banks in other developed nations, the report acknowledged heightened concerns that capital flows into Asia could accelerate, potentially leading to asset bubbles and excessive credit growth, spurring local authorities to undertake costly foreign-exchange intervention, and leaving the region vulnerable to the risk of sudden outflows down the road. But the World Bank noted that such Hot Money flows are a given.

“The bulk of the capital flowing into the region consists of foreign direct investments, which creates jobs and growth in production capacity. Nevertheless, monetary authorities should closely monitor developments in their capital accounts,” particularly in countries that have recently experienced rapid credit growth, World Bank Chief Economist for East Asia and Pacific Bert Hofman said.

“Appropriate exchange rate arrangements and capital market development could provide a cushion against undesirable effects of capital inflows, while macro-prudential measures could guard against excessive credit growth,” he added.

The World Bank highlighted the growing importance of the East Asia Pacific region to the world economy, tipping it to contribute nearly 40% of global growth in Y 2012. It also noted that in the case of a shock to growth, most countries in the region would be able to loosen their fiscal stance to cushion the blow.

Interested in Investing in Asia? Hedge Funds, Real Estate, Trading

Linda Johnson,
Business Development Director – Private Client Group,
Heffernan Capital Management
Sales@Heffcap.com

Singapore

3 Raffles Place #07-01
Bharat Building Singapore 048617
Tel: +65 6329 6408
Fax: +65 6329 9699