East Asia policy makers hold steady: World Bank

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East Asia policy makers hold steady: World Bank

The World Bank said most policy makers in East Asia’s emerging nations should keep interest rates steady as economic growth is poised to accelerate next year without spurring inflation.

Developing East Asia will probably expand 7.5 percent in 2012 and 7.9 percent in 2013, the Washington-based lender said in a report yesterday. The forecast for this year is higher than an October prediction of 7.2 percent. The region is expected to contribute about 40 percent of global growth in 2012, said Bert Hofman, World Bank chief economist for East Asia and the Pacific.

“Monetary policy stances in the region are largely appropriate in the current environment, in which negative shocks remain a dominant concern,” the World Bank said. “Receding inflation in most countries suggests that there is no need for immediate monetary tightening in the region in the absence of major shocks.”

Asian policy makers have loosened fiscal or monetary policies this year to bolster expansion, with rate cuts in China and Thailand and increased spending by Philippine President Benigno Aquino and Malaysian Prime Minister Najib Razak. A recovery in the global economy may be gathering momentum as reports this month showed a manufacturing gauge in China rising to a seven-month high and service industries in the U.S. unexpectedly grew at a faster pace in November.

Risks to the region’s economy include possible delays of reforms in the euro zone, automatic U.S. spending cuts and tax increases due in January, known as the fiscal cliff, and a possible sharp decline in the growth of investments in China, the World Bank said.

China’s economy may grow 7.9 percent in 2012, compared with 9.3 percent in 2011, the World Bank said today. Asia’s largest economy may expand 8.4 percent next year, it said.

“The slowdown in the Chinese economy appears to now have bottomed out,” the World Bank said. Growth in 2013 will be a result of “combination of lagging effects of earlier monetary expansions, local government fiscal stimuli, accelerated approval of central investment projects, and an upswing in the business cycle.”

China will probably maintain its annual economic growth target at 7.5 percent next year, according to a Bloomberg survey, signaling that the new leadership headed by Xi Jinping is prepared to expand fiscal and monetary easing should the nation’s recovery falter.

Bloomberg

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