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Bright regional growth prospects [17-01-2013]  
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The region's gross domestic product is projected to accelerate in 2013, with Malaysia expected to grow by 5 per cent

Strong domestic demand, improved global financial conditions and trade flows will boost growth in the East Asian and Pacific countries including Malaysia over the next three years, the World Bank said.

The region's gross domestic product (GDP) is projected to accelerate in 2013, with Malaysia expected to grow by around five per cent against a regional forecast of 7.9 per cent, which will mirror China's acceleration to 8.4 per cent before its growth stabilises in 2015.

In its latest global economic prospects, the World Bank described the regional growth in the medium term as assuring.

The region will also benefit from a potentially rapid economic transformation in Myanmar and from the recent accession of Laos to the World Trade Organisation, which completed the trade integration of the region.

Regional disposable income will benefit from appreciating exchange rates and rapid growth in wages in China, Indonesia, Thailand and Malaysia.

Accommodative monetary policy and low inflation in Asean-4 (Indonesia, Malaysia, Thailand, Philippines) are also expected to contribute, although some fiscal tightening is envisaged in Malaysia as well as Indonesia.

The World Bank, however, warned that the region could see a one per cent cut in its GDP in 2013 if the risk of the eurozone crisis unfolds.

Failure to resolve the US debt and fiscal issues would cut regional GDP by 1.1 per cent in 2013, it said.

At the same time, the regional growth outlook is subject to slowdown in China, stemming from a risk of unwinding of China's high investment rates.

"The regional growth outlook is vulnerable to developments related to volatile capital inflows, related asset price bubbles, excessive credit growth and risk of sudden capital outflows," it said, adding that economies in the region are also vulnerable to energy price spikes.

Headline inflation, has however, showed a decline in the region in 2012, with the sharpest observed in China, Malaysia and Vietnam.

In a statement, the World Bank group president Jim Yong Kim said the economic recovery remains fragile and growth in high-income countries is weak.

"But we can't wait for a return to growth in the high-income countries, so we have to continue to support developing countries in making investments in infrastructure, health and education," he said, adding that it will set the stage for the stronger growth they can achieve.

Meanwhile, International capital flows to developing countries, which fell 30 per cent in the second quarter of 2012, have recovered and bond spreads have declined to below their long-term average levels of around 270 basis points.

Foreign direct investment inflows to developing countries such as Brazil, China, India, Indonesia, Malaysia, Russia, South Africa and Thailand slowed in 2012.

Economic growth in the region in the third quarter of 2012 rebounded, driven by domestic demand in China, Indonesia, Malaysia, the Philippines and Thailand and a surge in exports towards the newly-industrialised economies (NIE) of the region namely South Korea, Taiwan, Hong Kong and Singapore.

But, given China's increased weight in the global economy, an abrupt slowing in Chinese investment would slow global growth significantly, and the GDP in the region could decline by 0.4 per cent for countries like Malaysia and 0.7 per cent for Vietnam and Thailand.

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