Singapore, October 5

The World Bank (WB) cut its 2015 and 2016 growth forecasts for developing East Asia and Pacific, and said the outlook was clouded by the risk of a sharp slowdown in China and possible spillovers from expected increases in US interest rates.

The Washington-based lender now expects the developing East Asia and Pacific region, which includes China, to grow 6.5 per cent in 2015 and 6.4 per cent in 2016, down from 6.8 per cent growth in 2014. Its previous forecast in April was 6.7 per cent in each of 2015 and 2016.

“The baseline scenario for regional growth is subject to a greater-than-usual degree of uncertainty, and risks are weighted to the downside,” the WB said in its latest East Asia and Pacific Economic Update report today.

“In particular, uncertainty surrounds the trajectory of, and spillovers from, China’s economic rebalancing and the expected normalisation of US policy interest rates.”

WB said downward revisions to regional growth forecasts mainly reflect moderate slowdown in China’s economy, which it sees growing 6.9 per cent in 2015 and 6.7 per cent in 2016, down from 7.3 per cent in 2014. The previous forecast was for China to grow 7.1 per cent in 2015 and seven per cent in 2016.

Growth in developing East Asia, excluding China, is expected to hold steady in 2015 at 4.6 per cent before accelerating to 4.9 per cent in 2016, the WB said. Those were down from previous forecasts of 5.1 per cent growth in 2015 and 5.4 per cent in 2016.

WB said outlook for household incomes and business profits in Indonesia and Malaysia was clouded by weakness in global commodity markets. It said lower real trade-weighted exchange rates can play a key role for such commodity exporters to adjust to weaker terms of trade. “Depreciations of Indonesian rupiah and Malaysian ringgit against US dollar have reduced the drop in exporter revenues, corporate profits, and household incomes in local currency terms — a valuable shock-absorbing effect.”

“Authorities should limit currency market interventions to smoothing volatility, given the importance of maintaining adequate reserve buffers,” the WB added.

Further declines in Asian currencies against the dollar could cause balance sheet strains in countries with significant dollar-denominated debt, it said.

Extreme poverty to fall below 10pc

WASHINGTON: Extreme poverty will this year fall to less than 10 per cent of the global population for the first time, although there is still ‘great concern’ for millions in Africa, a World Bank report said on Sunday. “This is the best story in the world today — these projections show us that we are the first generation in human history that can end extreme poverty,” said Jim Yong Kim, president of the World Bank, which holds its annual meetings from October 9 to 11 in Lima, along with the IMF. According to World Bank projections, about 702 million people, or 9.6 per cent of the world population, will live below the poverty line this year, mostly in Sub-Saharan Africa and Asia. In 2012, that number stood at 902 million, or about 13 per cent of world population. It stood at 29 per cent in 1999. — AFP