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

UN Ambassador Power Highlights Plight of Women Prisoners

She launches the 'Free the 20' campaign, aimed at profiling women being deprived of their freedom around the world More

Satellite Launch Sparks Spectacular Light Show

A slight delay in a satellite launch lit up the Florida sky early this morning More

Fleeing IS Killings in Syria, Family Reaches Bavaria

Exhausted, scared and under-nourished, Khalil and Maha's tale mirrors those of thousands of refugees from war-torn countries who have left their homes in the hopes of finding a better life 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.
Nobel Prize Winner Malala Talks to VOAi
X
August 31, 2015 2:17 AM
Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video Nobel Prize Winner Malala Talks to VOA

Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video War, Drought Threaten Iraq's Marshlands

Iraq's southern wetlands are in crisis. These areas are the spawning ground for Gulf fisheries, a resting place for migrating wildfowl, and source of livelihood for fishermen and herders. Faith Lapidus has more.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Rebuilding New Orleans' Music Scene

Ten years after Hurricane Katrina inundated New Orleans, threatening to wash away its vibrant musical heritage along with its neighborhoods, the beat goes on. As Bronwyn Benito and Faith Lapidus report, a Musicians' Village is preserving the city's unique sound.
Video

Video In Russia, Auto Industry in Tailspin

Industry insiders say country relies too heavily on imports as inflation cuts too many consumers out of the market. Daniel Schearf has more from Moscow.
Video

Video Scientist Calls Use of Fetal Tissue in Medical Research Essential

An anti-abortion group responsible for secret recordings of workers at a women's health care organization claims the workers shown are offering baby parts for sale, a charge the organization strongly denies. While the selling of fetal tissue is against the law in the United States, abortion and the use of donated fetal tissue for medical research are both legal. VOA’s Julie Taboh reports.
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.

VOA Blogs