News / Asia

Three Questions: World Bank Report on Asia

Asian stock market
Asian stock market
Les Carpenter

Most economies in East Asia and the Pacific are doing quite well these days, with many engaged in a rather robust recovery.  However, in a new update report this week from the World Bank called "Robust Recovery, Rising Risks" the bank notes that output in the region has recovered to levels that prevailed before the global financial crisis.  The Update cautions though, that large capital inflows into many of these economies could lead to higher inflation and worsening asset bubbles.  

In its report update, it would seem the World Bank, is lowering its outlook for growth next year.  We asked the co-writer of the report, World Bank Chief Economist for the East Asia and Pacific region, Vikram Nehru, if that was the case?

"Actually we haven't lowered our outlook.  What we've basically reflected in our outlook is the fact that in 2010, the rebound in East Asia from the crisis (the global financial crisis) was, in fact in some countries, growth was extremely rapid.  What we're seeing now in the second half of 2010 is a gradual decline in growth as excess capacity is used up, new investments are needed.  So, what we're seeing is a return to normalized growth patterns, something that is going to be much more sustainable.  And that is what we're expecting in 2011, too.  That is, arrival at a more sustainable growth rate in the region, so it's not actually a decline or reduction in the outlook."

China's economy has been booming and now the World Bank is predicting a slowing or at least a return to something closer to normal.    If China is returning to normal, why do you think they made the move at this time to raise interest rates?


"First of all we are projecting that for this year China's growth will be at about 9.5 percent and 8.5 percent next year.  That's still a pretty smart growth rate by any standards and in line with China's past performance.  In recent months, in fact over the past year or so, there has been some concern in China about overheating in the economy and the real estate market and in other financial assets.  Inflation is beginning to creep-up.  Now, we can't be absolutely sure what was in the minds of the policy makers behind this interest rate increase, but I suspect that the main reason is to try and put a further dampener on inflation and inflationary expectations.  This was an unexpected move, so clearly there is some concern with the authorities on what's happening in terms of asset prices and the asset price bubble.  You know, in September, just this last month, there was an uptick in property prices in China which went against the trend of gradual decline in the stabilization of property prices.  So, it's possible that this could have been the concern behind this latest move."


You say the there is a problem with capital flows, a problem in a number of countries in East Asia.  Is this an indicator of what may lie ahead?


"It's very much an indicator of what's ahead.  What we have seen is this huge expansion in global liquidity lapping at the shores of developing East Asian countries.  We expect this increase in liquidity is going to be here to stay for some time as the advanced countries, and in particular the United States, struggles to reignite growth and to stabilize their economies.  So, I think, in many of the East Asian countries we are seeing a rise in capital inflows, we're seeing appreciating exchange rates and we're seeing the emergence once again of asset price increases which are not too worrisome at this stage, but they bear very close watching.   Now, provided the authorities take appropriate action as the Chinese authorities seem to have done, then I think these inflationary pressures can be contained.  But, this is something we're going to have to watch very closely going forward."

You May Like

Obama: I Will Do 'Everything I Can' to Close Guantanamo

US president says prison continues 'to inspire jihadists and extremists around the world' More

Sierra Leone Educates on Safe Ebola Burials

Also, country is improving at rapid response to isolated outbreaks, but health workers need to be even faster, officials say More

Christmas Gains Popularity in Vietnam

Increasingly wealthy Vietnamese embrace holiday due to its non-religious glamor, commercial appeal More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US Decision on Cuba Underscores Divisions Among Miami Cubansi
X
Sharon Behn
December 19, 2014 9:34 PM
For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video US Decision on Cuba Underscores Divisions Among Miami Cubans

For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video Three Cities Bid for Future Obama Presidential Library

President Barack Obama still has two years left in his term in office, but the effort to establish his post-presidential library is already underway. The bid for the Obama Presidential Library is down to four locations in three states -- New York, Hawaii, and Illinois. As VOA’s Kane Farabaugh reports, each of them played an important part in the president’s life before he reached the White House.
Video

Video Cuba Deal is Major Victory for Pope’s Diplomatic Initiatives

Pope Francis played a key role in brokering the US-Cuba deal that was made public earlier this week. It is the most stunning success so far in a series of peacemaking efforts by the pontiff. VOA religion reporter Jerome Socolovsky has more.
Video

Video Fears of More Political Gridlock in 2015

2014 proved to be a difficult year politically for President Barack Obama and a very good year for the U.S. Republican Party. Republican gains in the November midterm elections gave them control of the Senate and House of Representatives for the next two years -- setting the stage for more confrontation and gridlock in the final two years of the Obama presidency. VOA National Correspondent Jim Malone has a preview from Washington.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.

All About America

AppleAndroid