Growth window slams shut on open economies

Growth window slams shut on open economies
Above photo is the Philippines, one among the Asean economies that will be supported by buoyant domestic demand.

South-East Asia has become an island of hope in a sea of global economic troubles, according to a World Bank report.

The report echoes an earlier one by the Asian Development Bank lauding the success of much of Asean in achieving domestic- led economic growth that is helping insulate it from outside problems.

The outlook is less happy for open economies such as Singapore and Hong Kong, which will be hit by external setbacks.

In contrast, buoyant domestic demand - especially in Indonesia, Malaysia, Thailand and the Philippines - is compensating for weak external demand from Europe, the US and Japan and in the face of a slowdown in China, the World Bank said in its latest East Asia and Pacific Update published on wednesday.

As a result, growth in what it refers to as Developing East Asia (excluding China) will rebound to 5.6 per cent this year from 4.4 per cent in 2011.

Continuing strong performances by Indonesia, Malaysia, and the Philippines will boost the region's growth further to 5.7 per cent next year and 5.8 per cent the following year, the bank said.

"Another bright spot in the region is Myanmar's re-engagement with the international community. The Myanmar economy continued to accelerate in fiscal year 2011-12, with GDP growth at 5.5 per cent, and expected to reach 6.3 per cent in fiscal 2012-13."

What stands out in developments over the past year is that while the overall trade balance in Developing East Asia has stayed in surplus this year, "trade as a whole did not contribute to the region's growth".

Instead, robust growth in domestic consumption and investment along with a recovery in manufacturing provided the main dynamo.

In contrast to the domestic demand-driven buoyancy in the principal Asean countries, the open economies of Singapore, Hong Kong and South Korea will see growth slump sharply from last year because of their greater vulnerability to external demand slowdowns, the bank suggested.

All three should improve in 2013 and 2014, however, it added.

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