Publication: World Bank East Asia and Pacific Economic
Update 2010, Volume 1 : Emerging Stronger from the Crisis
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2010
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2012-03-19
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East Asia has recovered from the economic and financial crisis. Largely thanks to China, the region's output, exports and employment have mostly returned to the levels before the crisis. Leading the global economy, real gross domestic product (GDP) growth in developing East Asia is poised to rise to 8.7 percent in 2010 after slowing from 8.5 percent in 2008 to 7.0 percent in 2009. This report also identifies two common regional agenda items for the medium term. First, the process of regional integration, driven by Association of South East Asian Nations (ASEAN) commitments to creating a single economic area, will need to continue. Deeper regional economic integration is now even more important, given prospects for slower growth in advanced economies. Behind-the-border trade barriers must be lowered, even in the face of incipient protectionist pressures around the world, including in the region. Deeper integration will encourage agglomeration economies and intra-industry trade, support sustainable urbanization, lower costs, and increase international competitiveness. Second, addressing climate change is high priority in the region. Mitigation measures must be strengthened to improve land and water use, bolster energy efficiency and conservation, and foster a much larger role for renewable sources of energy. Moreover, with investment rates in the region higher than in developed countries, there is scope for East Asia to move rapidly to the "green" technology frontier. Such a move will give the region a competitive advantage in a sector poised for rapid global growth. At the same time, the adaptation agenda will require enhancing the region's cooperation and disaster risk management frameworks. Institutional and regulatory frameworks for improving the resiliency of economic activity, reducing drought and flood risk, and managing coastal areas and small islands, are critically needed.
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“World Bank. 2010. World Bank East Asia and Pacific Economic
Update 2010, Volume 1 : Emerging Stronger from the Crisis. World Bank East Asia and Pacific Economic
Update ; 2010, Vol No. 1. © World Bank. http://hdl.handle.net/10986/2455 License: CC BY 3.0 IGO.”
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Most have eschewed the use of capital controls, and allowing exchange rates to appreciate may protect against importing inflation but jeopardizes international competitiveness. The sharp increase in commodity prices portends increased volatility for the foreseeable future. All commodity prices are on an upswing, some either at all-time highs or at levels exceeding those reached only two years ago. These latest price developments continue the trend that began earlier this decade of a steady climb in real commodity prices, interrupting a decade-long downward trend in the 1990s. Policies to provide incentives and ensure the investment needed to help develop new and greener energy sources, notably with low-carbon emissions and much improved energy efficiency should be a priority for governments in the region. Output growth throughout developing East Asia moderated in the second half of 2010 but was still surprisingly strong. 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Although last December's fiscal pact and liquidity support from the European Central Bank helped stabilize financial markets, recent political events and market developments point to continued challenges. Renewed market volatility and a further slowdown in European economies cannot be ruled out. The European Union (EU), along with the US and Japan, accounts for over 40 percent of the region's direct export shipments and an estimated 60 percent if intraregional trade linked to production networks is taken into account. A serious disruption in the EU would also have knock-on effects on East Asia's exports and growth by lowering growth in other regions, particularly Eastern Europe. Moreover, European banks provide a third of trade and project finance in Asia. Policies to support the movement of labor among countries can contribute to higher productivity. Migration in developing East Asia has helped fill labor shortages in host countries and remittance flows have contributed to poverty reduction and macroeconomic stability in home countries. Yet, as in other parts of the world, existing bilateral and regional migration policies do not always allow migrants to move efficiently to where returns are highest or allow firms to obtain the workers they need, and these policies may contain incentives for undocumented migration. Improved regional migration policies could enhance the gains from regional economic integration and allow those countries facing a negative demographic drag on economic growth in the next generation to obtain much-needed labor inputs.
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