World Bank cuts growth forecast for Asia-Pacific, China GDP to gain 7.7%

China's output now predicted to expand 7.7 per cent this year, and bleak outlook faces commodity exporters in developing countries

PUBLISHED : Tuesday, 09 October, 2012, 12:00am
UPDATED : Tuesday, 09 October, 2012, 3:01am

The World Bank cut some of its growth forecasts for Asia yesterday on the back of weakening economic growth prospects in China and uncertainties brought about by turmoil in Europe.

The bank trimmed this year's growth outlook for developing economies in the Asia-Pacific to 7.2 per cent, down 0.4 percentage point from its forecast in May.

For China, the world's second-largest economy, the bank pared its growth forecast to 7.7 per cent from 8.2 per cent. The mainland's economy grew 9.3 per cent last year.

In its report, the bank warned that China's cooling economy faced the risk of a "more pronounced slowdown". The "slowdown this year has been significant, and some fear it could still accelerate", the bank said.

China's economic growth slowed owing to weakening domestic demand and investment growth after authorities clamped down on the property sector. Private investment growth fell the most, while state-owned enterprises' investment started to accelerate again from the end of last year, the bank said.

In contrast, consumption was still growing robustly, spurred by wage increases, adjusted for inflation, notably for migrant workers, the report said.

Last year, consumption contributed more to the growth in the mainland's gross domestic product (GDP) than investments did, the first time this has happened since GDP records began in 1952. It could be the start of a trend in domestic rebalancing, and some observers associated this with a more permanent growth slowdown in China, the report said.

Economic growth could rebound to 7.6 per cent next year in the developing Asia-Pacific, but risks remained because of the unresolved euro-zone crisis and unclear economic prospects in China and the US, it said.

The report warned that commodity exporters in developing economies could suffer more from the growth slowdowns.

Export growth for the developing Asia-Pacific as a whole slowed to 4.5 per cent in this year's second quarter from a year earlier, outpaced by import growth of 5.2 per cent, and trade as a whole now no longer contributed to the region's growth, the report said.

In July, with the exception of Vietnam and China, where exports edged up a meagre 1 per cent from a year earlier, exports fell in all the other major economies in the region. That was a sharp reverse from the 15 to 20 per cent growth in exports for all of last year. Domestic demand, however, remained strong in the region overall and could contribute to growth next year, it said.

Separately, the Organisation for Economic Co-operation and Development said the composite leading indicator for its 33 members fell to 100.1 in August from 100.2 in July, reflecting a continued slowdown in growth.