East Asia will this year record its strongest economic performance since the 1997-1998 financial crisis with average growth of 7.1 percent but a slowdown is expected in 2005, the World Bank said Tuesday. Aided by China's red-hot economy, strong commodity prices, a sharp rebound in the global high-tech sector and buoyant export orders from the developed economies, East Asia is having a "remarkable year", the World Bank said in its twice-yearly outlook on the region.
"High growth is being experienced by middle income and poor economies alike," the World Bank said.
"Exports should turn in their strongest performance since 1988, supported by demand from China, the global recovery, a rebound in the global high-tech industry and strong commodity prices.
"Economic growth is expected to top 7.0 percent for the region overall, while among its developing economies it should reach near 8.0 percent, the strongest since the regional financial crisis."
The report said the region as a whole should grow an average 7.1 percent this year, up from 5.9 percent in 2003 and 6.0 percent in 2002. China is forecast to lead the way this year with growth of 9.2 percent, followed by Singapore on 8.3 percent, Hong Kong at 7.4 percent, Vietnam at 7.2 and Malaysia at 7.0 percent.
The region's power-packed economic display has lifted at least 40 million East Asians out of poverty this year, bringing the total to 250 million over the past five years, the World Bank said.
According to the World Bank definition, people living on less than two dollars a day are considered to be impoverished.
"We are estimating that by the end of this year, the number of people living on less than two dollars a day will be around one third of the region's population," the bank's regional vice president, Jemal-ud-din Kassum, said in a statement accompanying the report.
"Even excluding China, the absolute number of poor would be at their lowest level ever, finally overcoming the higher poverty created by the 1997 crisis."
However, with evidence suggesting the expansion cycle may have peaked and high oil prices expected to start having a significant impact, the World Bank is forecasting regional economic growth will moderate to 5.9 percent next year.
East Asia, which is a net oil importer, has had to pay an extra 25 billion dollars so far this year because of higher energy prices and the impact will likely be felt in 2005 as the flow-on effects dampen consumer demand, it said.
"For the East Asia region, higher prices will directly curb incomes in the majority of larger economies because they are net oil importers," the report said.
"East Asian economies will also be affected by the impact of higher oil prices on the main export markets in the developed world."
The bank expects higher oil prices to shave 0.5 to 1.0 percentage points off growth rates in East Asia in 2005, with the Philippines, Thailand and South Korea among the worst affected.
"We expect a slowdown across all groups," Homi Kharas, the World Bank's chief economist for East Asia and the Pacific, said during a briefing on the report.
"The newly industrialising economies are also slowing and Southeast Asia and smaller economies will be hurt by the spike in oil prices and by slower global trade growth."
The likelihood of another cyclical downturn in the high-tech sector, worries whether Beijing can engineer a soft landing for its economy and the United States' record twin deficits also pose risks for East Asia, the report said.
"Concerns about slowing OECD (Organisation for Economic Co-operation and Development) and China growth are amplified by evidence of slowing demand growth in the highly cyclical global high-tech industry," the World Bank said.
"These concerns are exacerbated by the fact that the oil price shock is occurring in a context of already large global macro-economic imbalances, notably the record and growing US current account deficits."
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