HONG KONG—Growth in East Asia’s developing economies will pick up next year after China’s slowdown hits bottom but considerable risks remain, including the possibility of a sharp drop in investment growth in the world’s second-biggest economy, the World Bank said Wednesday.
The Washington-based lender said in a report that the region will expand by 7.9 percent in 2013 after growing 7.5 percent this year. East Asia remained resilient despite the lackluster global economy and will contribute almost 40 percent of global growth in 2012, the bank said.
The report covers countries like China, Indonesia and Thailand but excludes Japan.
China’s economy is forecast to expand 7.9 percent this year before accelerating to 8.4 percent in 2013, powered by government stimulus spending and faster approval of big investment projects and an upswing in the business cycle.
“The slowdown in China appears to now have bottomed out,” the bank said.
Signs indicate that China’s economy is rebounding after growth slid to a 3 ½ year low of 7.4 percent in the latest quarter, but the recovery looks rocky. The bank’s optimism comes amid recent patchy economic data, including a plunge in export growth in November.
“The most recent data suggest that, despite further weakening in the external environment, China’s growth rate will continue to recover in the remainder of the year and into next year,” said the bank, which predicts China’s growth will ease off to 8 percent in 2014.
Excluding China, the region will expand 5.6 percent in 2012 and 5.7 percent in 2013, thanks to strong growth in the Philippines and relatively mild slowdowns in Indonesia and Vietnam.
The World Bank’s “East Asia and Pacific Update” also highlighted possible risks, including a sharp drop in China’s “unusually high investment rate,” which would have “significant domestic and global consequences.”
The bank also worried about the outlook for the eurozone countries as they struggle to push through reforms, negotiations over the “fiscal cliff” in the US and large amounts of money flowing into the region in search of higher returns, which could lead to inflation and asset bubbles.