SINGAPORE: Britain’s shock decision to leave the European Union will not be as damaging to developing Asia’s economies as feared, the World Bank said on Wednesday as it increased its growth forecast for the region this year.
Countries in the Mekong region led by Myanmar are projected to expand at the fastest pace in the next three years, the bank said in an updated report on East Asia and the Pacific, though Thailand was projected to be a laggard.
World Bank chief Asia economist Sudhir Shetty said the upgrade for the regional economy came after the group noticed positive early results from the June 23 vote by Britain to leave the EU.
“That has translated also into relative stability in terms of exchange rates and in terms of capital flows, so that has been helpful for this region,” he told Asia-based journalists in a video conference from Washington.
Global markets went into freefall immediately after the vote as dealers feared a recession in Britain that could hit the global economy. But since then, world markets have rallied and Britain’s economy is picking up.
Shetty said based on the bank’s initial analysis “the bottom line right now is that there’s likely to be very little impact of Brexit” over the short term as the region is “not very connected” to Britain in terms of trade and financial links.
The region’s developing economies will grow 5.8 per cent this year, the Washington-based institution said, up 0.1 per cent age point from its forecast made in April. It also tipped 5.7 per cent growth in 2017 and 2018.
The bank, however, warned a hike in US interest rates, widely expected in December, and a potential sharp slowdown in China could impact its forecast.
Myanmar, which has embraced democracy following decades of military rule, will grow 7.8 per cent this year, 8.4 per cent in 2017 and 8.3 per cent in 2018.
Once isolated Myanmar has rapidly transformed itself into one of the world’s fastest growing economies since its once brutal junta handed power to a reformist government in 2010, sparking the lifting of most international sanctions and a flood of foreign investment.
The impoverished nation has boasted average growth rates above eight per cent the past five years.
However, while the World Bank report noted stronger-than-expected growth in Thailand during the first half of 2016 it added, “a broad-based and self-sustaining recovery has yet to take hold.” It projected 3.1 per cent expansion for 2016, up from 2.8 per cent last year.
Thailand’s economy has struggled with years of political instability since the military seized power in 2014.