The World Bank cut its growth forecast for Asia on Monday in a new sign of the impact of weakening global demand and warned China\u2019s cooling economy faces the risk of a \u201cmore pronounced slowdown.\u201d
\nThe bank cut this year\u2019s growth outlook for developing Asia-Pacific economies to 7.2 percent, down from its May forecast of 7.6 percent. The bank cut its forecast for China, the region\u2019s biggest economy, to 7.7 percent from May\u2019s 8.2 percent.
\n\u201cIn a fragile external environment, the economy in the East Asia and Pacific region continues to slow down,\u201d the bank said in a report. \u201cThe risk remains of a more pronounced slowdown in China than currently expected, while commodity exporters are at particular risk of a global slowdown.\u201d
\nThe bank cited weak global demand due to the lackluster U.S. recovery and Europe\u2019s recession. It said Europe\u2019s debt crisis still is a \u201cmajor risk,\u201d followed by the U.S. \u201cfiscal cliff\u201d \u2014 a mix of tax and spending cuts due to take effect at year\u2019s end that might depress growth.
\nGrowth in China has slowed largely due to government controls imposed to cool an overheated economy and inflation but also has been hurt by weak demand for Chinese exports. Growth fell to a three-year low of 7.6 percent in the quarter ending in June and officials including President Hu Jintao say it might decline further before recovering.
\n\u201cChina\u2019s slowdown this year has been significant, and some fear it could still accelerate,\u201d the World Bank said.
\nCommodity exporters could be most at risk in case of a renewed global slowdown, the report said. They include Mongolia, Laos, Timor Leste, Fiji and Papua New Guinea.
\nThe region is relatively well-positioned to weather a European crisis or global slowdown, the bank said. It noted most have well-capitalized banks, modest government deficits and large financial reserves.
\nExcluding China, the region\u2019s economic output should grow 5.5 percent this year, the bank said. It forecast worldwide growth of 2.3 percent this year, rising to 2.6 percent in 2013.
\nIndonesia should achieve 6.1 percent growth this year, while Malaysia grows 4.8 percent and the Philippines by 5 percent, the bank said. It forecast Thailand\u2019s growth at 4.5 percent and Vietnam at 5.2 percent.
\n\u201cFor 2013, growth is expected to pick up in most of the region\u2019s other developing economies, where domestic demand remains robust,\u201d the bank said.
\nTrade-driven Asian economies need to rebalance away from reliance on foreign demand for their exports and encourage consumer spending, the World Bank said.
\n\u201cThe subdued outlook for advanced economies continues to put a premium on domestic demand, and thus rebalancing remains important for most countries in the region,\u201d the report said. <\/p>\n