World Bank cuts East Asia GDP outlook, flags China risks

Mon Oct 8, 2012 12:21am EDT
 
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By Kevin Lim

SINGAPORE (Reuters) - The World Bank cut its economic growth forecasts for the East Asia and Pacific region on Monday and said there was a risk the slowdown in China could worsen and last longer than many analysts have forecast.

"Unlike the rest of the region, China is experiencing a double whammy -- the growth slowdown is driven by weaker exports as well as domestic demand, in particular investment growth," World Bank Chief Economist for East Asia and the Pacific Bert Hofman said at a briefing in Singapore.

He stressed, however, that the World Bank, like many economists, still expects China to have a soft landing as seen from the bank's revised 7.7 percent growth forecast for this year and 8.1 percent for next year.

The World Bank earlier on Monday released its latest East Asia and Pacific Data Monitor, warning China's that slowdown could accelerate.

In the report, the international lender said that ambitious investment plans announced by several local governments in China could face funding constraints, "not least because governments are feeling the pinch of a cooling real estate market, which lowers land sales revenues".

The World Bank said the central government was unlikely to come up with a major fiscal stimulus package as policymakers were concerned about a rebound in home prices and a possible reversal of hot money flows.

Nevertheless, the bank expects growth in China to pick up in 2013, helped by monetary policy measures introduced earlier this year and an acceleration of central government investment spending.

The World Bank had earlier this year forecast 8.2 percent GDP growth for China in 2012 and 8.6 percent in 2013.   Continued...

 
An employee makes a check on steel products at a workshop of Kunming Iron and Steel Co. Ltd. in Kunming, Yunnan province June 16, 2008. REUTERS/Stringer