EAST ASIA and the Pacific need to be on the lookout for opportunities and headwinds arising from China’s economic rebalancing in favor of greater consumption, the World Bank said on Wednesday.
“It will be important for policymakers to be attentive to China’s efforts to rebalance its economy as a related shift will present both new opportunities,” Andrew Mason, World Bank Acting Chief Economist for East Asia and Pacific, said in a press video conference out of Bangkok.
“While the economic outlook for East Asia and Pacific remains largely positive, it is important to recognize that the region continues to face heightened pressures that began in 2018 and that could still have an adverse impact. Continued uncertainty stems from several factors including further deceleration in advanced economies, the possibility of a faster-than-expected slowdown in China, and unresolved trade tensions,” according to Mr. Mason.
The World Bank projects growth in the Philippines of 6.4% in 2019 due to delay in the 2019 Budget’s approval, though it expects growth to pick up in 2020 to 6.5%.
The World Bank projects growth in China of 6.2% in 2019 and 2019.
Growth is also expected at 5.2% this year and 5.3% next year in Indonesia; 4.7% this year and 4.8% next year in Malaysia; 3.8% and 3.9% next year in Thailand; and 6.6% this year and 6.5% next year in Vietnam.
Mr. Mason said that policymakers should pursue a path that “not only… reduces poverty but also… protects households from falling back to poverty,” and this can be done by creating opportunities with the private sector and strengthening human capital.
Mr. Mason said that China is moving away from a production oriented economy and shifting toward a domestic consumption-led one.
“What this implies over time and it has implications for the other countries in the region is that over time it will reduce its demand for intermediate inputs and increase its demand for final consumption goods,” Ms. Mason said.
“That’s why countries in developing East Asia and the Pacific need to pay attention to the challenges and opportunities associated with the rebalancing,” according to Mr. Mason.
Meanwhile, Mr. Mason noted that the tightening of monetary policy by the Bangko Sentral ng Pilipinas (BSP) was done effectively to help combat inflation in 2018.
“That can still be used in the Philippines for inflation targeting should that become a concern again in the future,” Mr. Mason said, noting however that financial conditions no longer warrant tightening in the region.
“There’s no more immediate argument for countries to increase their policy rate,” Mr. Mason said. — Reicelene Joy N. Ignacio