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How can China keep on growing while its exports are shrinking?

Louis Kuijs's picture

Getting a clear view on where China’s economy is heading is not easy at the moment, as evidenced by large variations in GDP growth forecasts. One of the confusing developments is that while exports have continued to do badly recently, the domestic economy has exceeded most observers’ expectations by a wide margin.

Working in recent weeks on the World Bank’s new China Quarterly Update, released today, we have been trying to determine how the economy has been doing on balance, what the prospects are, and what this means for economic policy. In this blog, I will summarize our understanding of recent developments and prospects, leaving the upshot for economic policies for a later discussion (keep reading after the jump).

Can China become the engine for world economic growth?

David Dollar's picture

This somewhat provocative question was the title of a conference hosted by Oxford and Standard Charter this week in London.  My answer was: "No, not tomorrow; but yes, eventually – especially if China continues to vigorously pursue economic reform."
 
The reason that China cannot be the engine of global growth tomorrow is straight-forward.  For the last decade an awful lot of the final demand in the world has come from the U.S.  That era is over for the time being as U.S. households now concentrate on rebuilding their savings.  No one country can fill the gap left by the slowdown in U.S. consumption: Japan, Germany, and China together have less consumption than the U.S., so no one of them can replace the U.S. as the major source of demand in the world.  It's not realistic to expect China to play that role.  But we are probably moving into a more multi-polar period in which there is more balanced growth in all of the major economies. 

Remittances and the Philippines' economy: the elephant in the room

Eric Le Borgne's picture

In the World Bank's latest semi-annual economic update for the East Asia and Pacific region, titled "Battling the Forces of Global Recession" and released today, we mentioned the Philippine economy's resilience, both in absolute and relative terms.

Laos' economy less affected by crisis, but sustaining growth a challenge

Katia Vostroknutova's picture

With a relatively unsophisticated economy that is agriculture- and natural resource-based, Laos has been affected by the crisis less than some neighboring countries.

Seeing the financial crisis: What might contraction look like in Cambodia?

Stéphane Guimbert's picture

Declining revenue of tuk-tuk drivers in Cambodia shows even the informal sector isn't insulated.
Growth forecasts in Cambodia are generating a fair bit of confusion. Many simply question whether it is possible for GDP growth to be lower in 2009 than in the past 15 years.

The World Bank today launches its projection of a 1 percent contraction of the Cambodian economy. This is based on an analysis of available statistics and feedback from a range of economic actors. Yet, to most of my Cambodian friends, it remains hard to conceive.

It is true that "seeing" such a contraction will be difficult. Basically, what it means is that economic activity in 2009 will be pretty much the same as in 2008. So the fact that we continue to have traffic jams in Phnom Penh, see tourists at the Royal Palace, and hear construction machines in many residential areas is consistent with such a projection. What will change, though, is that incomes will not increase this year as fast as past years and it will also become more difficult for the 250,000 young people leaving school each year to find their first job. What also will be different is that with no growth in aggregate, there will be a proportion of those with a livelihood at the end of the year worse than at the beginning.

Regional roundup: Finance in East Asia – April 3

James Seward's picture

I'm sorry it has been a while since the last East Asia & Pacific regional roundup. A lot has happened, so let's get right to it. As usual, the downward trends continue across the region.

Financing, Oversight Critical For Afghanistan's Army, Police

William Byrd's picture

Afghanistan needs more well-trained Afghan soldiers and better Afghan police, but the question is who will pay for them? The country cannot afford to pay the additional costs out of its own limited budget resources—any further money coming from this source will be at the expense of much less funding for urgent development priorities like educating children, improving basic health, building public infrastructure, etc. Will the international community commit to provide predictable funding for a number of years for Afghanistan’s security sector? This is a critical backbone of the state, whose development is essential to over time progressively replace international military forces which are far more costly. Creating security forces without the ability to pay for them will lead to obvious problems. And while expanding the Afghan security forces, it is critical to ensure that sound oversight and accountability mechanisms are in place.

Your questions on China's economy answered - see the transcript

James I Davison's picture

In case you weren't able to join World Bank economists and regular bloggers David Dollar and Louis Kuijs earlier today in a live online chat, a transcript from the in-depth discussion is available here.


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