Several small economies, including Laos, Mongolia and Papua New Guinea, will continue to be affected by low commodity prices and weaker external demand. Cambodia's growth will be slightly below 7 percent during 2016 to 2018, reflecting weaker prices for agricultural commodities, constrained garment exports, and moderating growth in tourism. In the Pacific Island countries, growth is likely to remain moderate.
"Developing East Asia and Pacific faces elevated risks, including a weaker-than-expected recovery in high-income economies and a faster-than-expected slowdown in China. At the same time, policy makers have less room to manoeuver in setting macroeconomic policy," said Sudhir Shetty, Chief Economist of the World Bank's East Asia and Pacific Region.
"Countries should adopt monetary and fiscal policies that reduce their exposure to global and regional risks, and continue with structural reforms to boost productivity and promote inclusive growth."
Slower-than-expected global growth could weaken demand and reduce growth in developing East Asia and Pacific, especially among commodity exporters, the report said.
Therefore, it calls for close monitoring of economic vulnerabilities, particularly those associated with high levels of debt, price deflation, and slower growth in China, and high corporate and household debt in some other large economies.
In addition, the report also warns the region should be prepared for natural disasters, which pose a substantial risk for Pacific Island countries.
Continued macroeconomic prudence and sustained structural reform are also appealed for.
In China, the report recommends strengthening market discipline in the financial sector, including by allowing credit allocation to be more market-driven, gradually opening up sectors dominated by state-owned enterprises to greater competition and continuing to reform the household-registration system.
It also urges a shift in the public spending from infrastructure toward public services, such as education, health and social assistance and towards environmental protection.
Across the region more generally, there is a growing need for prudent fiscal policy to guard against future external shocks.
This is especially important in those economies where growth has been sustained through increased public or private sector borrowing, or where external demand has been supported by the commodities boom.
Over the longer term, the report calls for governments to boost transparency and strengthen accountability.
It urges countries to reduce barriers to regional trade, such as non-tariff measures and regulatory barriers, including to trade in services.
And the report stresses that the benefits from the digital revolution will be maximized by developing regulatory regimes that favor competition, and by helping workers adapt their skills to the demands of the new economy.
