East Asia's economies delivered another solid performance in
2005, now surpassing Europe as the region most open for trade in
the world, according to the World Bank's latest East Asia
Update.
In 2005, developing country economies grew by 8.2 percent and
this solid growth is expected to continue at a 7.8 percent, rate in
2006.
Growth in East Asia was broad based for the second year in a
row, exceeding 4 percent in every country, except Timor-Leste. Even
in many Pacific Island countries, per capita growth has been
positive thanks to improved macro-economic stability.
This impressive performance was in spite of rising oil
prices?-- the highest in 25 years?-- rising interest
rates, continued worries over the financing of the United States'
current account deficit and over the prospect of the spread of
avian flu, reports the twice-yearly look at the economies of East
Asia and Pacific.
In the first half of 2005, high oil prices, slower growth in
China, and slowing high-tech exports briefly reduced growth across
the region. But from mid 2005 economies have rebounded, boosted by
strong export growth to China, Japan and other regional economies
as well as the United States.
"East Asia's exports surged to over US$2 trillion last year, and
this powered the region's growth.? Strong growth in turn is
having a dramatic impact on poverty reduction" said Homi Kharas,
Chief Economist for East Asia and the Pacific. "Although 580
million people in the region still live on less than US$2 a day,
this number has been falling by about 50 million people each year
over the past five years."
On a more cautionary note, the report notes that investment in
the region, which had rebounded in 2004, slowed in 2005, and
capital flows in many countries reversed course last year,
including short-term flows, which fell due to the narrowing of the
interest-rate gap between Asia and the United States.
Open economies
East Asia has now surpassed Europe as the most open region in
the world with exports almost doubling over the past three years,
but this level of openness also exposes economies to some new
challenges.
Challenges like checking the potential spread of avian flu,
particularly among humans, are bringing countries together, most
recently in Beijing, to collaborate on steps to prepare, control,
and prevent future outbreaks among poultry.
"So far the impact of bird flu outbreaks has been isolated to
the poultry sector and some farm households and has not spilled
into the overall economy," said Milan Brahmbhatt, lead economist
and author of the report, "The key focus now is on national
preparedness to appraise and implement integrated country
programs."
The region's economies have much to gain from a successful
completion of the Doha round of trade talks, but increased trade
also means some domestic challenges, including boosting efforts to
innovate and build skills, improve the climate for investment, and
better protect vulnerable segments of the society.
"To take advantage of these new export opportunities, the
region's going to have a lot of job turnover," Kharas said. "And
most countries in the region don't have unemployment insurance. New
mechanisms to help people as they move from one job to another will
be important."
Climate change
The East Asia and Pacific region is already among the most
vulnerable to natural disasters, whose intensity could be affected
by climate change, the subject of the East Asia Update's special
focus section. While the region is still largely rural, most of the
gross domestic product and large cities, are coastal and at risk
from rising sea levels and weather-related disasters. Some Pacific
Island nations could even disappear. Countries need to urgently
take steps to strengthen their disaster preparedness and to climate
proof construction and development.
Rapid economic growth has also meant the fast growth of
greenhouse gas emissions from the region. The report notes that
countries will need to reduce emissions and adopt policies to
promote greater energy efficiency and conservation. A variety of
international schemes exist to encourage countries to act.
(China.org.cn March 30, 2006)