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East Asia growth forecast cut by the World Bank

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The international lender said that a slowdown in China’s growth and the prospect of the end of US stimulus measures would affect growth in the region’s economies.

China’s economy is expected to grow by 7.5%, lower than the 8.3% prediction made in April this year.

Lower commodity prices have also weakened prospects, the bank said.

Last week, the Asian Development Bank (ADB) cut its outlook for the region, also citing slower growth in China as a reason.

Time to prepare

The ABD and the World Bank both said the much anticipated future scaling down of the $85bn-a-month stimulus programme in the US was a cause for concern.

The World Bank’s chief economist for East Asia and the Pacific, Bert Hofman, said: “It will mean an increase of global interest rates for which countries would need to prepare. And they need to prepare for potential financial market volatility in the process.”

However, he said that the delay in the Federal Reserve’s decision to begin the unwinding, or tapering, of its stimulus programme had brought one benefit.

“In a way, the talk of tapering in July and August was sort of a very nice general rehearsal for the actual thing”.

Headwinds and tailwinds

However, Mr Hofman noted that, while there were causes for concern, the region was still growing.

“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,” he said.

The World Bank said the slowdown in Chinese growth was a result of the country shifting its export-dominated economy to one where domestic demand plays a greater role.

Countries such as Indonesia, Thailand and Malaysia will see slower expansion because of lower global commodity prices, slower exports and reductions in investment.

Excluding China, the World Bank predicts that the economy of the East Asian region will grow by 5.2% in 2013 and 5.3% in 2014, slower than the 6.2% growth for 2012.

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