Oct 5, 12:13 AM EDT

World Bank trims East Asia growth forecasts on risks from China slowdown, US rate increase

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HONG KONG (AP) -- The World Bank on Monday trimmed its growth forecast for developing East Asian economies, reflecting risks from China's slowdown and a looming U.S. interest rate hike.

The bank said it expects developing Asian and Pacific economies to grow 6.5 percent this year, down 0.2 percentage points from its previous outlook. It forecast growth of 6.4 percent next year, down 0.3 percentage points from its previous outlook.

Economic output of the 14-country region that includes China, India, Indonesia and Vietnam expanded by 6.8 percent last year. The forecast excludes Japan and South Korea.

Since the forecast in April, "greater uncertainty about the global economy has weighed on the performance and prospects of developing East Asia and Pacific," the Washington-based lender said in a report.

It cited Beijing's effort to steer the world's second-largest economy to slower, more sustainable growth and a widely expected U.S. interest rate increase from ultra-low levels in place since the 2008 global crisis.

"Developing East Asia's growth is expected to slow because of China's economic rebalancing and the pace of the expected normalization of U.S. policy interest rates," said Sudhir Shetty, Chief Economist of the World Bank's East Asia and Pacific Region. "These factors could generate financial volatility in the short term, but are necessary adjustments for sustainable growth in the long term."

China is the biggest trading partner for most of its Asian neighbors and steadily declining growth over the past five years has depressed demand for raw materials and industrial components.

Excluding China, the region's developing economies are expected to grow 4.6 percent this year, in line with last year's expansion, the bank said. It said Vietnam was expected to post 6.2 percent growth but smaller economies were forecast to decelerate.


World Bank: www.worldbank.org

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