Growth in the East Asia and Pacific region moderated to 7.2% in 2013 from 7.4% in 2012, with growth in China unchanged at 7.7%. Growth slowed in Indonesia, Malaysia, and Thailand due to policy tightening aimed at reducing imbalances from loose policies in 2007-2012. The region's growth is expected to remain flat at around 7.2% in 2014-2016, though risks include a sudden tightening of global financing conditions or a rapid decline in China's investment rates. Major downside risks have decreased but not been eliminated and include a protracted Eurozone recovery and US fiscal policy uncertainty. Regional tensions could also undermine growth prospects.

1. Global Economic
Prospects
January 2014
Ekaterine Vashakmadze
World Bank
January 2013
East Asia &
Pacific Region
www.worldbank.org/globaloutlook

2. 2013 marked another year of
weakening growth in East Asia and the
Pacific region with growth moderating
to 7.2% from 7.4% in 2012.

3. 2013 marked another year of
weakening growth in East Asia and the
Pacific region with growth moderating
to 7.2% from 7.4% in 2012.

4. 2013 marked another year of
weakening growth in East Asia and the
Pacific region with growth moderating
to 7.2% from 7.4% in 2012.

5. Growth in China was unchanged from the
7.7% recorded in 2012.
A one percentage point slowdown in
growth in the rest of the region reflects a
moderation of economic activity in
Indonesia, Malaysia, and Thailand.

6. Growth in China was unchanged from the
7.7% recorded in 2012.
A one percentage point slowdown in
growth in the rest of the region reflects a
moderation of economic activity in
Indonesia, Malaysia, and Thailand.

7. Figure 1. Growth in 2013 moderated reflecting a sharp slowdown in the first quarter in a number of
large Middle Income countries of the region partly reflecting policy tightening aimed at unwinding
imbalances which resulted from loose policies implemented during 2007 and 2012
Quarterly GDP, percent change, saar
12
Real credit growth, % change, year-over-year
60
50
40
30
20
10
0
-10
-20
0
China
China
Malaysia
Indonesia
Thailand
Indonesia
Developing countries excl. China
Vietnam (RHS)
Source: World Bank, IMF IFS.
Oct '13
Jan '13
Apr '12
Jul '11
-10
Oct '10
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
2013Q2
2013Q3
0
10
Jan '10
2
20
Apr '09
4
30
Jul '08
6
40
Oct '07
8
50
Jan '07
10

8. Figure 2. The impact of domestic adjustment was also exacerbated by a tightening of
international financing conditions in the second quarter of 2013
Sovereign Bond Interest Rate Spreads, basis points over US
450
400
350
300
250
200
150
100
50
May '13 May '13 Jun '13 Jul '13 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13
Developing countries
Indonesia
Source: World Bank, IMF, IFS, Datastream.
Vietnam
China

9. Figure 3. Imports contracted sharply reflecting policy tightening and contributed to stronger net-exports
Import volume, % change, 3m/3m, saar
60
40
20
0
-20
-40
-60
Jul '12
Oct '12
China
Jan '13
Thailand
Source: World Bank, Datstream.
Apr '13
Jul '13
East Asia excluding China P.R.
Oct '13

10. Figure 4. Business sentiment started to improve in the second half of 2013, but
remains precarious
Diffusion index, greater than 50 indicates expansion
60
58
56
54
52
50
48
46
44
42
40
Jan '12
May '12
Vietnam
Sep '12
South Korea
Jan '13
Indonesia
Source: World Bank, Markit Economics, Datstream.
May '13
Japan
Sep '13
China

11. Figure 5. Regional exports rebounded following a six month period of contraction
Export volume, % change, 3m/3m, saar
70
50
30
10
-10
-30
-50
May '12
Aug '12
China
Nov '12
Indonesia
Source: World Bank, Datstream.
Feb '13
May '13
East Asia (excl. China)
Aug '13
Philippines
Nov '13

12. Figure 6. Pressures on the regional currencies have considerably lessened from May-September
tightening episode, but remain present particularly in Indonesia reflecting on-going adjustment
to external balance pressures and in Thailand related to on-going political tensions.
Nominal Effective Exchange Rates (April 1, 2013=100)
110
105
China
Malaysia
100
95
Thailand
90
85
Indonesia
80
May '13 May '13 Jun '13 Jul '13 Aug '13 Sep '13 Oct '13 Nov '13 Dec '13
Source: World Bank, Datstream.

13. Overall growth in the region is expected
to stay flat at around 7.2% in 2014 and
ease insignificantly to 7.1% in 2015 and
2016.

14. Overall growth in the region is expected
to stay flat at around 7.2% in 2014 and
ease insignificantly to 7.1% in 2015 and
2016.

15. Overall growth in the region is expected
to stay flat at around 7.2% in 2014 and
ease insignificantly to 7.1% in 2015 and
2016.

16. The region… although of a relatively low probability, the outlook
would be sensitive to the risks of either an abrupt tightening of
global financing conditions, or a rapid decline in China’s
investment rates.

17. The region… although of a relatively low probability, the outlook
would be sensitive to the risks of either an abrupt tightening of
global financing conditions, or a rapid decline in China’s
investment rates.
Major tail-risks have subsided but, have not been eliminated
and include protracted recovery in the Euro Area and fiscal
policy uncertainty in the United States.

18. The region… although of a relatively low probability, the outlook
would be sensitive to the risks of either an abrupt tightening of
global financing conditions, or a rapid decline in China’s
investment rates.
Major tail-risks have subsided but, have not been eliminated
and include protracted recovery in the Euro Area and fiscal
policy uncertainty in the United States.
In addition, although currently contained, an escalation of
country-level (Thailand, for example) as well as bilateral and
geo-political tensions may undermine regional growth
prospects.

19. Global Economic
Prospects
January 2014
Ekaterine Vashakmadze
World Bank
January 2013
East Asia &
Pacific Region
www.worldbank.org/globaloutlook