World Bank Expects Slower Growth in Developing East Asia Pacific in 2014

Forecast Shows Region to Grow Nearly 7% This Year and Next
SINGAPORE, October 6, 2014 – Developing countries in East Asia Pacific will see
slightly slower economic growth this year, but the pace of growth in the region,
excluding China, will pick up next year, as the gradual recovery in high-income
economies boosts demand for exports from the region, according to the East Asia Pacific
Economic Update released today by the World Bank. Still, developing East Asia Pacific
remains the fastest-growing region in the world.
Developing East Asia will grow by 6.9% this year and next, down from 7.2% in 2013, the
report says. In China, growth will ease slightly to 7.4% this year and 7.2% in 2015, as the
government seeks to put the economy on a more sustainable path with policies addressing
financial vulnerabilities and structural constraints. Excluding China, growth in
developing countries in the region is expected to bottom out at 4.8% this year, before
rising to 5.3% in 2015, as exports rise and domestic economic reforms advance in the
large Southeast Asian economies.
“East Asia Pacific will continue to have the potential to grow at a higher rate—and
faster than other developing regions—if policy makers implement an ambitious domestic
reform agenda, which includes removing barriers to domestic investment, improving
export competitiveness and rationalizing public spending,” said Axel van Trotsenburg,
World Bank East Asia and Pacific Regional Vice President.
While the region as a whole will benefit more than any other region from the recovery of
the global economy, the impact will vary across countries, depending on their investment
and export environment. China, Malaysia, Vietnam and Cambodia are well positioned to
increase their exports, reflecting their deepening integration into the global and regional
value chains that have driven global trade in the last 20 years.
The report revised the World Bank’s 2014 forecast for Malaysia to 5.7%, up from 4.9% in
April, because of robust exports in the first half of the year. Cambodia is expected to
grow at 7.2% in 2014, boosted by rising garment exports. Thailand is also expected to
benefit from the global recovery, given its strong integration into global value chains – if
the respite in political unrest is sustained.
But in Indonesia, which still relies on exporting commodities, growth will drop to 5.2%
this year from 5.8% in 2013, constrained by falling commodity prices, lower-thanexpected government consumption and slower credit expansion.
A bright spot for the region’s economies: robust private consumption, supported by
various factors such as election-related spending in Indonesia and a strong labor market

7% in 2015. the report recommends a comprehensive strategy to address issues ranging from early childhood development to higher education and lifelong . measures to bolster revenues and reduce poorly targeted subsidies will help create space for productivity-enhancing investments and povertyreducing spending. such as metal exporters in Mongolia and coal exporters in Indonesia. Chief Economist of the World Bank’s East Asia and Pacific Region. need to reduce the fiscal deficit and tighten monetary policy. and Thailand. and international and regional geopolitical tensions could affect prospects. The region also remains vulnerable to a sharp slowdown in China. as the government seeks to strike a balance between containing growing risks and meeting growth targets. Significant uncertainties remain that could affect the region’s growth. with recent institutional and policy reforms and international re-engagement. could face downside risks in the near term. the report indicates that structural reforms in sectors previously reserved for state enterprises and services could help offset the impact of measures to contain local government debt and curb shadow banking. Global financial conditions could tighten Malaysia. In the Philippines. could hurt commodity producers especially hard. though unlikely to happen. will be at 8. and complement these measures with structural reforms to enhance export competitiveness. improving trade logistics. which accounts for more than half of the country’s overall growth. “The best way for countries in the region to deal with these risks is to address vulnerabilities caused by past financial and fiscal policies. The report identifies policy recommendations for different countries to deal with risk and embark on a path of sustainable growth. forecasted to be at 6. Mongolia and Lao PDR. And. which. buoyant remittances pushed up private consumption. as many education systems in the region aren’t producing skills demanded in the labor market. It is published twice yearly and is available free of charge at www. In China.5% this year and next. In Indonesia. especially in the euro zone and Japan.worldbank. while gradually rebuilding fiscal buffers. The East Asia and Pacific Update is the World Bank’s comprehensive review of the region’s economies.4% this year and 6. Malaysia. High-income economies. and liberalizing services and foreign direct investment. The report also discusses long-term structural reforms that will help countries maximize the benefits from the global recovery. the Philippines. Economic growth in Myanmar. for example. Key reforms include investing more in infrastructure.” said Sudhir Shetty.

Which of the following is not a form of capital? (A) Machinery (B) Knowledge (C) Workers (D) Tools 4.1. Through which of the following combinations do firms produce output? (A) Capital and productivity (B) Capital and labor (C) Labor and productivity (D) Labor and workers 3. What do you call the change in the growth level from year to year? (A) The growth level (B) The growth rate . Which of the following is not a form of labor? (A) Children’s work (B) Adult’s work (C) Immigrant’s work (D) Machine’s work 6. What is the only thing that makes an economy grow in the long run? (A) Increases in labor productivity growth (B) Increases in the price level (C) Increases in the interest rate (D) Increases in the labor force 2.

(C) The starting level (D) The starting rate 7.When we state that the economy grows at 3% per year over a period of 30 years. Instructions . Why would a politician undertake an economic policy that increases the growth rate but ultimately decreases the growth level? (A) To improve short term public opinion (B) To improve the long term economy (C) To improve the standard of living (D) To improve the savings rate DISCUSSION Activity 1 — The Universal Replicator This assignment explores the economic implications of an imaginary new technology. Many issues about growth and change are raised. An increase in the capital utilized in the production process leads to what? (A) An increase in the price level (B) An increase in workers’ productivity (C) An increase in the interest rate (D) An increase in the savings rate 8. what does the 3% represent? (A) The growth rate (B) The growth speed (C) The growth acceleration (D) The growth level 9. called the Universal Replicator.

the ability to devote resources to social problems. Agricultural production has increased tremendously and food prices have decreased substantially. then discuss their answers before moving to the next question. 4. doctors.S. Common Answers. teachers. and Points for Discussion 1. Questions. look at the long-term advances in agriculture.S. jobs. Two hundred years ago. the ability to meet all material needs. What kinds of problems would you expect? Structural unemployment. waste disposal. If a car is put into the Universal Replicator. Assume this technology becomes widely adopted throughout the country by manufacturers of all types of products. new legal structures needed. agriculture. police. chaos. disruption of institutions. Give them time to write an answer to a question. What would happen to the price of goods? The price of goods would drop dramatically. 2. What impact would the Universal Replicator have on the economy? Most students focus on the negative aspects of this technology: job loss. income distribution may become less equitable. Most service jobs will still be needed. the machine will create an exact working duplicate at the touch of a button.The Universal Replicator is a machine that can replicate any physical good. . more leisure time. skills become obsolete. any assembly line job be needed? 3. the elimination of tedious and unsafe jobs. It will work on any non-living object. lawyers. inventors. barbers. the Universal Replicator doesn’t really exist but technological change has had very similar effects. For example. 80% of the U. mining. Ask the class to answer the following questions. Today. labor force worked in farming. recession. 5. What benefits do you see? More material goods. Of course. 6. What kinds of jobs would still be necessary? Designers. Some will also see the positive side: the elimination of poverty. etc. farming accounts for only 2% of U. idleness. What jobs would not manufacturing.

we have discovered ways to lower our use of natural resources. Many public issues. technological progress increases material wellbeing. Like the Universal Replicator. but less extreme path. Thus. and police protection.Manufacturing has followed a similar. The “Deindustrialization of America” has been accompanied by increased industrial output. we find more workers in the service sector. . Fewer workers are able to produce more goods at lower costs. wastes. education. The same questions remain: What happens to displaced workers? What happens to the distribution of income? How are by-products. Question: Are Natural Resources a Limit to Growth? This section points out that as the population has grown over time. and pollution handled? Activity 2: Start out by asking students what factors they believe will lead to greater economic growth in the future. As agricultural and manufacturing employment decline. Lower prices for agricultural and manufactured goods mean services become relatively expensive. such as concerns about health care. most economists are not worried about shortages of natural resources. are affected by this increase in the relative cost of services.