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World Bank cuts Asia growth outlook
Publication Date : 09-10-2012
The World Bank has slashed its growth outlook for the Asia-Pacific, and warned that a major crisis in Europe could lead to an even sharper slide.
The bank yesterday revised its growth forecast for the region down to 7.2 per cent for this year, shaving nearly half a percentage point off its earlier May estimate of 7.6 per cent growth.
One key factor is fast-slowing China, which has suffered its worst economic performance in 13 years.
The gloomy outlook is also largely the result of a sharp fall in exports as Asia's key markets in Europe and the United States continue to falter, said Mr Bert Hofman, World Bank chief economist for East Asia and the Pacific.
"The global economy is in a fragile and uncertain state, and is taking its toll on the Asia-Pacific region," he said at a press briefing yesterday.
At 7.2 per cent growth, the rate is the slowest since 2001, and even slower than the peak of the financial crisis in 2009, he added.
The World Bank's dimmer growth outlook for 14 developing countries, including China, follows the Asian Development Bank's (ADB) slashing of forecasts recently.
The ADB cut its growth forecast for this year for developing Asia from 6.9 per cent in April to 6.1 per cent - the lowest since 2009.
The International Monetary Fund is also expected to cut its forecasts for Asia when it releases an update of the global economy today.
China will also be hit by weaker growth, with the World Bank expecting the country to grow by just 7.7 per cent this year, down from 9.3 per cent last year.
"Unlike the rest of the region, China is experiencing a double whammy - a slowdown that is driven by weaker exports and domestic demand," said Hofman.
The bank's report said the region's growth should rebound to 7.6 per cent next year, but flagged key risks.
It said that should a major crisis occur in Europe, such as more than one country exiting the euro zone, Asia's growth could fall by two percentage points next year.
Analysts said the outlook for Singapore, which is not included in the World Bank's report, is similarly bleak.
CIMB economist Song Seng Wun said Singapore should grow between 1.5 per cent and 1.8 per cent for the full year, which is at the lower end of the Government's official 1.5 per cent to 2.5 per cent range.
"Most of us were taken aback at how weak the second half has been, and there has been no indication of a rebound so far," he said.
ANZ foreign currency strategist Khoon Goh expects the central bank to tweak its exchange rate policy to accommodate the weaker growth outlook.
He expects the central bank to continue allowing the Singapore dollar to continue appreciating, but at a slower pace, when the latest policy is released on Friday.