East Asia's growth expected to continue

Associated Press

BEIJING — East Asia's economies will be hurt this year by weak U.S. demand for imports but keep growing due to reforms begun after the 1997 Asian financial crisis, the World Bank said last week.

China should be the best performer in an export-dependent region, growing by 7.3 percent, the bank said in a biannual forecast. China reported growth last year of 8 percent.

The sharpest fall in growth would be in South Korea, from a region-high 8.8 percent last year to 4.5 percent this year, the bank said.

The report comes amid growing concern over the impact of a faster than expected U.S. slowdown and a global decline in demand for electronics.

The World Bank, headquartered in Washington, finances development projects in poor countries.

Its report echoed forecasts by a March 19 report from the Manila-based Asian Development Bank. Its report on five countries — Indonesia, Philippines, South Korea, Malaysia and Thailand — said their overall growth would fall to 4 percent this year from 7.1 percent last year.

Especially hard-hit will be electronics exporters such as South Korea, the World Bank said. Even the robust 5 percent growth projected for Malaysia, a major electronics producer, is down from 8.5 percent last year.

Reforms begun after the 1997 crisis have made economies less vulnerable to shifts in trade, but they must push forward banking and corporate restructuring to protect their recovery, said the bank's regional vice president, Jemal-ud-din Kassum.

"The countries of East Asia cannot afford to be complacent about reforms," Kassum said at a news conference.

Especially worrisome is Indonesia, where political instability and the slow pace of reforms have hurt investor confidence, Kassum said.

The bank also called on governments to focus on judicial reform and poverty reduction, noting that nearly half the people in East Asia still live on less than $2 a day.

It called for special attention to environmental protection.

"It is vital that the countries of the region not relegate the environment to secondary status on the policy agenda," Kassum said.

In China, the World Bank is very optimistic about steps to clean up the heavy burden of bad debt carried by state banks and open its financial industries, Kassum said.

China has promised to open its banking, insurance and other financial markets to foreign competition as a condition of membership in the World Trade Organization.