Growth in developing countries likely to soften US slowdown

Resilience in developing economy is helping to cushion the current slowdown in the United States, according to the World Bank in its latest Global Economic Prospects Report.

Real GDP growth for developing countries is forecast at 7.1 percent this year, compared to the 2.2 percent for high-income countries.

Global economic growth is expected to be moderate this year – the World Bank is looking at a 3.3 percent expansion overall, down from 3.6 percent in 2007.

However, it said developing countries would outperform their more developed counterparts due to booming numbers from China and India.

And the Singapore’s economy will not lag far behind.

Hans Timmer, Manager, The World Bank, said: “The outlook for Singapore is still very strong – not as strong as 2007 where you had 7.5 percent growth. We expect growth to come down just below 7 percent, but that’s still very strong.

“Singapore benefits from its location; it benefits very much from the extraordinary dynamics in Asia itself and it also benefits from its policy to improve production potential within the country itself.”

According to the World Bank, Singapore has a role to play in helping developing economies adopt and absorb new technologies, which will be key for better global stability in 2008.

Andrew Burns, Senior Economist, The World Bank, said: “Well, I think that Singapore has a very important role. One of the things that we emphasis in the report is that much of technology diffusion and the technological progress that we observe in the developing countries is due to increased globalisation, increased trade and exposure to the technology of high-income countries like Singapore.

“As a result, as Singapore continues to expand and interact with developing countries, they’re going to have a very important role in helping them along.”

A weaker US dollar, the prospect of a recession in the US, and rising financial market volatility are seen as downside risks this year. But the World Bank said East Asian economies have so far held their own.

Mr Timmer said: “At least till now, half a year after the turmoil in the financial markets broke out, East Asian countries have still been very resilient. The continued strong performance signals that the impact is relatively limited.

“East Asia is mitigating a slowdown in the US by providing export opportunities. Exports are growing at a rate of more than 20 percent in the US and that impact is very positive.

“What we are worried about is not so much that growth is slow in East Asia but that growth is going too fast, which could create bubbles.”

The World Bank is expecting to see a 9.7 percent expansion in GDP this year for East Asia and the Pacific as a whole. – CNA/so

Source : Channel NewsAsia – 9 Jan 2008

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