Transition to private sector growth tricky: World Bank

Transition to private sector growth tricky: World Bank
By Georgina Joseph | Posted: 12 April 2010 2118 hrs

	Photos 1 of 1 Mr Vikram Nehru, World Bank Chief Economist for the East Asia & Pacific
	Related News • World Bank raises developing East Asia growth forecast to 8.7% for 2010

 
SINGAPORE : The World Bank believes that the East Asian region will have to start to withdraw fiscal and monetary stimulus sometime this year.

But the bank said this can only be achieved when private sector investment becomes the region's growth driver.

With economic recovery and firming prices, some Asian economies are starting to gradually rein in their fiscal stimulus measures.

Some measures include requiring banks to set aside more reserves and in some cases like Vietnam and Malaysia, raising interest rates.

While there is some debate about the timing for withdrawing stimulus, the World Bank believes it should be determined by a recovery in private sector investment.

Vikram Nehru, chief economist, East Asia and Pacific region, The World Bank, said: "When that happens, it will become relatively easy for governments to start withdrawing their fiscal and monetary stimulus, and without any disruption to growth because the private sector will then become the engine of growth."

The World Bank said rapid growth in East Asia will be possible in the coming years, even in a weakened global economy.

Mr Nehru added: "Growth can definitely continue rapidly in East Asia, provided that East Asian countries continue to reform, continue to implement medium term reform agendas, and the regional agenda of regional economic integration and the appropriate response to climate change is adopted."

The World Bank said China, for example, would need to rebalance its economy and gear it towards domestic consumption and away from an export-led growth.

In a report last week, the World Bank upgraded its growth forecast for developing East Asian economies this year to 8.7%. This was almost a full percentage point higher than its previous forecast in November last year.

- CNA/al

- wong chee tat :)