 | | - Real GDP in developing East Asia is projected to increase by 8.2 percent in 2011 (4.7 percent excluding China), while growth will slow to 7.8 percent in 2012.
- In 2011, an estimated 38 million people will move out of poverty, and the proportion of people living on less than US$2 a day is expected to decrease to about 24 percent, down two percentage points from 2010.
- Growth in developing East Asia in the first half of 2011 continued to moderate, mainly due to weakening external demand. Domestic demand in East Asian economies remained the largest contributor to growth, although it is easing driven by the normalization of fiscal and monetary policy.
- The growth slowdown in East Asia was particularly pronounced in industrial production. Exports of major regional industrial supply chains, especially electronics, have started to decline.
- Demand for commodities and raw materials remained strong, helping resource-rich economies maintain high levels of export and GDP growth.
- China is gaining importance as a source of global demand as imports held up better than exports. A shift to more consumer goods imports in China is benefiting the region’s manufacturing exporters.
- Lower growth in Europe in the course of fiscal austerity and the banks’ needs to increase capital coverage would affect East Asia. Less credit from European banks can also affect capital flows to East Asia.
- High reserves and current account surpluses protect most countries in the region against the impact of possible renewed financial stress.
- Due to widespread flooding, Thailand’s GDP growth was revised downwards to 2.4 percent, although damage assessments are not complete. Reconstruction after the flood is likely to contribute to growth in 2012.
- Impacts of the disaster are spreading through industrial supply chains. Recovery of production to pre-disaster levels in the region will also depend on the strength of global demand for electronics and cars.
- In the short-term, striking a balance between stimulating growth and fighting the effects of global uncertainty is the primary challenge for policy makers. Fiscal positions in most countries, while not as strong as before the 2008 crisis, leave sufficient space for fiscal stimulus if necessary.
- Slow global growth presents an opportunity for governments to refocus on reforms that will enhance growth in the medium- and long-term.
- Higher investment, including in productive infrastructure, education, and in building social security systems, can help countries increase productivity and move toward higher value-added production.
- Where levels of investments are already high, increasing the quality and efficiency of these investments should be the first priority alongside rebalancing growth towards domestic consumption.
- Given the outlook for protracted low global growth, any possible stimulus should be fiscally sustainable, well-targeted, and directed at promoting the structural transformation needed to sustain stronger, domestically driven growth.
- Further investment in disaster management and prevention is also becoming more important for the region.
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