World Bank raises growth Expectations for East Asia in 2018 but worries about a trade war

UNITED STATES (OBSERVATORY) –┬áThe World Bank raised its forecast for growth in the East Asia and Pacific region in 2018, but warned that a possible trade war between the United States and China could negatively affect growth in countries that are part of China’s supply chain.

The Washington-based bank said in a report on Thursday it expected East Asia and the Pacific developing region, which includes China, to grow 6.3 percent in 2018, slightly up from 6.2 percent in October.

The expected growth is 2018 below last year’s 6.6 percent, reflecting a slowdown in China as Beijing continues to rebalance its economy to become more dependent on domestic consumption rather than investment, adopting policies that focus more on slowing credit expansion and improving quality. Growth, according to the World Bank.

China’s growth in 2017 was faster than expected at 6.9 percent, prompting the World Bank to adjust its growth forecast for the year to 6.5 percent from its 6.4 percent estimate in October.

Sudheir Shetty, the region’s chief economist for the region, said the outlook did not take into account a potential trade war between the world’s two largest economies, but said he did not feel it was imminent.

Some US officials and analysts said they believe the dispute could eventually be resolved through dialogue, but Beijing has confirmed that no formal talks have been held.

However, Shetty pointed out that two-thirds of Chinese goods listed on the US list aimed at the United States to increase tariffs on them are manufactured in a supply chain extending across the region, especially in the Philippines, Malaysia and Vietnam.

If these tariffs are imposed on goods being assembled in China, the economies associated with the supply chain will be indirectly affected, Shetty told a news conference.

“It’s important that we have to worry about because the success of this region is based on open trade,” he said.

The World Bank expects the region to grow 6.1 percent in 2019, unchanged from its previous forecast, and by 6 percent in 2020.