East Asia faces slower growth, fewer jobs – World Bank

TOKYO: Developing nations in East Asia face a sharp slowdown in economic growth and a “painful surge” in unemployment that will prevent millions of people escaping poverty, the World Bank warned Tuesday.

A precipitous drop in global demand is slashing exports from the region, resulting in widespread factory closures, rising layoffs and lower wages, the Washington-based multilateral lender said in a report released here.

There are glimmers of optimism however, with the Chinese economy likely to begin recovering in the second half of 2009—boosting the region as a whole, it added.

How long the rebound lasts will depend on the health of key big economies such as the United States, Europe and Japan, which are major buyers of Asian products.

Economic growth in developing East Asia would slow to 5.3 percent in 2009, down from 8 percent last year and 11.4 percent in 2007, the bank said in a report on the region that excludes Japan, Hong Kong, South Korea, Singapore and Taiwan.

In December it had forecast growth of 6.7 percent this year.

For countries other than China, “the deceleration is even more stark,” said World Bank economist Vikram Nehru.

China slows down

China’s economy is expected to expand 6.5 percent in 2009, marking a sharp slowdown from the double-digit growth it had been enjoying before the global economic downturn began.

The bank said there were tentative signs that the Chinese economy may be almost over the worst thanks to Beijing’s huge stimulus spending package, with a recovery “likely to begin this year and take full hold in 2010.”

“We now see early signs of stabilization,” said Nehru.

That was good news for the rest of the region, he told a briefing in Tokyo, “because China is a very important market for developing East Asia.”

Any recovery in Asia, however, is likely to come too late to spare many people from losing their jobs.

Officially an additional one million people became unemployed in the region over the year to January, leaving about 24 million without work.

10 million in poverty

In reality the situation is even worse, the Bank said.

“Recent numbers are likely to be only the beginning of a painful surge in unemployment throughout the region,” it warned.

The crisis means that 10 million more people in the region will remain in poverty in 2009 than was expected just a year ago, the report said.

While the total number of destitute is likely to continue to decline from the current level of 200 million, some countries, such as Cambodia, Malaysia and Thailand, will suffer a rise in poverty, the Bank said.

“Even for countries with positive growth in per capita income, there will be significant hardships as people shift in and out of poverty amid large increase in unemployment,” it warned.

“The slowdown in poverty reduction in all countries and the increase in the number of poor in some could have important, perhaps even irreversible effects if malnutrition increases, parents take children out of school or forgo health care, or if households dispose of assets at depressed prices,” it said.

East Asia is well placed to recover from the current economic slump once global growth picks up, thanks to the strength of its exporters.

But the Bank said the region was unlikely to return any time soon to the rapid pace of growth of the past decade, because consumers in Western markets are expected to remain more frugal than they were before the economic crisis began. — AFP