World Bank EAP Monitor The World Bank East Asia and Pacific Data Monitor reports that the economy the in the region continues to slow down, with regional GDP growth forecast to be 7.2 percent compared with the 7.6 percent projection of last May. It is projected to recover to 7.6 percent in 2013. Tensions in the financial markets have eased, with the launch of the European Central Bank’s (ECB) bond-buying program, the ruling on the European Stability Mechanism (ESM) by the German Constitutional Court in early September, the announcement in the US of a 3rd round of quantitative easing by the Federal Reserve and an extension of a similar program by the Bank of Japan. Still, export growth in East Asia slowed to 4.5 percent year over year during the second quarter of 2012, with imports at 5.5 percent, “and trade as a whole now no longer contributed to the region’s growth.” At the same time, however, domestic demand continues to thrive, especially in ASEAN’s larger economies. “…in particular investment spending in Thailand, Malaysia and Indonesia is booming…” Growth in China is expected to slow this year to 7.7 percent from 9.3 percent in 2011, and rebound to 8.1 percent in 2013.
Financial market disruptions remain the main risk to the region’s outlook, and any weakening in the US or Europe would affect the region, although as noted the actions taken by Europe have lowered the risk of acute crisis. At the same time, concern is expressed over further slowdown in China, which though significant for the current year could accelerate further. Having noted the risks that remain to the region as a whole, the World Bank does note that “most developing East Asian economies are well positioned to weather a European crisis or a renewed global slowdown.” This is due to the fact that most have current account surpluses or modest deficits, as well as high levels of international reserves, with banking systems that are well capitalized. The monetary stimulus initiatives in the G3 economies could also result in capital inflows into the region. In addressing the medium term outlook, the World Bank recognizes that growth in the East Asia and Pacific region is of rising importance to the rest of the world, with its share in the global economy triple what it was two decades ago, or 18 percent today (measured in purchasing power parity). The outlook is for productivity increases to drive growth in the region for the medium term. This fits nicely with Thailand’s current move away from labor intensive production to higher productivity through sustainable and high technology. Thailand, already an upper middle income country, is on its way to having an advanced knowledgebased economy that not only taps into the inherent national advantages that it currently enjoys, particularly in the run up the ASEAN Economic Community, but also utilizes the comparative advantages of its neighbors and the wider regional economy. The Thailand Fiscal Policy Office has recently released its economic forecast indicating the possibility of 5.8 and 5.7 percent growth for 2012 and 2013 respectively, and inflation at around 3.5 percent. With its automotive sector growing towards becoming a top-10 auto manufacturing country, and other industrial sectors showing healthy growth as well, Thailand is well positioned to continue on its path of economic growth and investor confidence.