The World Bank has raised its 2005 economic growth forecast for East Asia to 6 percent from a November estimate of 5.9 percent, citing stronger-than-expected expansion in China.
"China has confounded all of our expectations," Homi Kharas, the Washington-based lender's chief economist for East Asia and the Pacific, said in a telephone interview. "China continues to be the driver of growth."
China's economy will probably expand by 8.3 percent, faster than an earlier projection of 7.5 percent, the World Bank said in a twice-yearly report on the region. The lender, whose definition of East Asia excludes Japan and the Indian subcontinent, cut its growth forecast for South Korea to 4.2 percent from 4.4 percent and raised its Indonesia estimate to 5.5 percent from 5.4 percent.
Economic growth in China reached an eight-year high of 9.5 percent last year and that pace of expansion was maintained in the first quarter, official figures show. That is helping sustain demand for Indonesian palm oil, South Korean computer chips and Philippine mobile phone parts as high oil prices curb spending in the United States, Europe and Japan.
East Asia's exports rose by 26 percent last year to US$1.8 trillion, the biggest gain in more than 20 years, boosted by China's demand for raw materials and energy. China, which accounted for 29 percent of East Asian economies' export growth in 2004, will probably import 16 percent more this year, the World Bank forecast.
The International Monetary Fund raised its 2005 growth forecast for developing Asia to 7.4 percent from 6.8 percent in its April 13 World Economic Outlook. The Asian Development Bank lifted its projection for East Asia to 6.7 percent from 6.4 percent on April 6.
East Asia's economy expanded by 7.2 percent in 2004, the fastest pace since the Asian financial crisis of 1997, as exports, consumption and investment "started firing together," the World Bank said. This year's projected slowdown to 6 percent growth reflects cooling demand in the world's largest economies, it said.
"That's a good sustainable growth rate because it comes from a balanced expansion in exports, incomes and investment," Kharas said in a statement accompanying the report. "Europe and Japan have both slowed. Oil prices are much higher and that's knocked off about 1 percent from the region's growth rate."
The World Bank said it expects crude oil prices to average US$42 a barrel, up from a November projection of US$36 a barrel. The December 26 tsunami will have a minor impact on overall growth in the two most seriously affected economies of Indonesia and Thailand, the World Bank report said.
Foreign exchange reserves in the region, excluding Japan, rose by US$300 billion to US$1.4 trillion last year.
(China Daily April 28, 2005)