The Chinese economy is forecasted to grow at a slower pace than other emerging markets in Asia, especially those in the ASEAN region, in 2015 due to China’s reform efforts and attempts to solve structural issues to put the country on a more sustainable path, according to the World Bank. The organization’s economic update predicts that annual GDP growth in the region, excluding China, will recover from 4.8% in 2014 to 5.3% over the next two years, while Chinese growth will steadily decline from 7.4% to 7.1%.
“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,” according to Axel van Trotsenburg, the vice president of World Bank East Asia and Pacific.
The report also states that Papua New Guinea will have the Asia Pacific region’s most dynamic economy in 2015, because of an increase in natural gas production and exportation growth driving the country’s annual growth rate as high as 20% next year.
The World Bank believes that while growth will be helped by optimism by investors and businesses with regards for the global economy, the outlook will vary between different countries due to structural weaknesses hampering investment and export competitiveness, as well as low export prices for producers of goods and commodities.
Cambodia, Vietnam and Malaysia are listed as some of the nations which are likely to increase their exports, reflecting their increasingly deep integration into regional and international markets. However, Indonesia’s export performance will be lackluster as its export prices continue to stagnate because of poor infrastructure hurting its competitiveness and attempts to diversify its economy.
Consumption continues to be the main driver of growth in the majority of Southeast Asia, while investment is declining which raises questions about the region’s long term outlook. The weakening inward investment is mostly because of a variety of issues which depend on each country, such as political uncertainty in Thailand and concerns of a property bubble in Vietnam and the Philippines.
Myanmar looks to benefit from two years of governmental reforms and re-engagement with the global community and it’s growth is predicted to be 8.5% between 2015 and 2017, despite some steps backward before the country’s presidential elections.
The report also notes that many East Asian economies are vulnerable to higher interest rates and changes led by the U.S. Federal Reserve. It clarifies that while government finances are not at risk from higher rates, households in more developed countries such as Thailand and Malaysia could potentially suffer.
With many countries in Asia looking to spur domestic growth and shift away from their export-based economies, the World Bank has given suggestions to improve education. It says that schools and universities are not producing the types of skills that demanded in the labor market, and that countries must adopt new approaches in order to promote higher education and lifelong learning.