The economic development in the East Asia Pacific region will continue to make other regions jealous this upcoming year. The region, however, still needs to be wary of changes in the global economic climate.
The World Bank announced April 7 that it projects continued stable economic growth for the East Asia Pacific region in 2014. The region is expected to remain the fastest growing in the world.
Growth in the region, however, will be at a slightly lower rate. China’s growth rate will decrease from 7.7 percent in 2013 to 7.6 percent this year. The rest of the region will grow by 5.0 percent, down from 5.2 percent last year.
The World Bank also points out that economic climates are not equal throughout the region. Southeast Asian economies are more at risk, facing tougher global financial conditions and higher levels of household debt. Smaller economies are expected to grow steadily, but face overheating risks.
Even the all-mighty China is not free from trouble. A slower-than-expected recovery of advanced economies, rise in global interest rates and increased volatility in commodity prices on account of the Crimean crisis are factors that could potentially hurt all of East Asia, according to Bert Hofman, Chief Economist of the World Bank’s East Asia and Pacific Region.
He recommends that East Asia redouble efforts to pursue structural reforms to increase their underlying growth potential and enhance market confidence. Such reforms are already taking place in China and are helping boost demand and growth. If done right, rebalancing could give boost to regional trade partners, but if the rebalancing is disorderly, the opposite could happen.
Possibly the most surprising feature of the report was its conclusions of 4 countries: Cambodia, Laos, Myanmar and Vietnam. Their exports have grown 19 percent annually, exceeding even China. These countries’ low wages, favorable demography and advantageous geography have been attractive enough to draw significant investments. While these are mostly in the textile industries, in the case of Vietnam, this has increasingly included electronics and telecommunications.
Despite its warnings of the instability of economic trends, the report was generally positive about the state of the economy of the East Asia Pacific region. It continues to be a region to watch because for its sustained growth.
The report did provide some explanation for the region’s success, but it was not nearly comprehensive enough. At a time when other regions struggle to keep up, it is important to monitor why and how this region has been able to have such sustained, successful growth.