World Bank Lowers East Asian Growth Estimate

U.S. equities have pulled back in Monday morning trading based on East Asian growth concerns stemming from a report by the World Bank.

With the Chinese  economy heading for its slowest annual growth rate in at least 13 years, there are some lingering concerns that a weaker economic climate in East Asia won’t be able to offset the slumping economies in the Western hemisphere as it once did in the financial crisis of 2008-2009.

The World Bank cut its forecast for East Asian region to 7.2 percent this year, from a previous estimate of 7.6 percent in the spring.

The bank also lowered its forecast for 2013 to 7.6 percent from 8.0 percent.

Growth in East Asia was 7.5 percent in 2009 during the global financial crisis.

Citing the euro zone crisis and a looming U.S. “fiscal cliff” the World Bank said that these issues pose “considerable risks” to the global outlook; however, robust domestic demand in East Asia is helping growth to remain well above growth rates in other parts of the world.

The World Bank said policy makers in Asia’s emerging economies have room to ease monetary and fiscal policies.

Many central banks in Asia have already dealt with slower growth by lowering interest rates. The Chinese Central Bank lowered the capital reserve requirements that its banks need to hold against deposits.

Although some economists fear the Chinese economy facing a “hard landing”, the World Bank clarified that it does not see it occurring.

“We therefore believe that the risk of a ‘hard landing’ remains small,” the World Bank said.

 

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