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Western policies may slow growth

Containers organised in stacks at the Shanghai Free Trade Zone. AFP
Containers organised in stacks at the Shanghai Free Trade Zone. AFP

Western policies may slow growth

Long-term growth prospects for developing economies, including Cambodia, will continue to be undermined by a lack of investment as well as the risk of increased protectionist policies by the United States, which could hamper the growth of commodity-driven economies, according to a new report released on Sunday.

In the World Bank’s latest forecast for East Asia and Pacific, economists said that despite a modest growth in the region that has dampened the weight of a Chinese slowdown, heightened policy uncertainty coming out of Washington, fiscal policies that are under review in Europe and the exit of Britain from the European Union “carries risks that could weigh on investor confidence”.

The report said that with the United States reassessing a number of existing trade agreements, including its exit from the Trans-Pacific Partnership, revisions of these agreements would “disproportionately” hurt countries in the region.

“Changing trade policies would disproportionately affect the more open economies in the East Asia and Pacific region, especially those with sizable exports to advanced economies, [for example] Cambodia, China, Malaysia, Thailand, Vietnam,” the economists said.

In addition, the report added that any significant disruption in Chinese exports would also undermine growth with large regional spillover effects.

Despite the external uncertainty, the World Bank kept its gross domestic product projections for Cambodia that it first released in January for 2017 and 2018, at a stable 6.9 percent growth rate. However, it lowered 2019 projections by 0.1 percent to 6.7 percent.

Overall, however, the World Bank painted an optimistic picture for global growth announcing that it would accelerate to 2.7 percent this year with developing economies as a whole growing at 4.1 percent compared with 3.5 percent in 2016.

“With a fragile but real recovery now underway, countries should seize this moment to undertake institutional and market reforms that can attract private investment to help sustain growth in the long-term,” said World Bank Group President Jim Yong Kim.

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