The World Bank is raising the potential that more than one country will exit the euro and cut its estimates for economic growth in Asia by more than two percentage points for 2013.
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The forecast for growth in Asian economies in 2012 was revised downward from 7.6% to 7.2%. It forecasts 2013 growth at 7.6%, down from 8%.
The bulk of the downward revision was tied to China’s economic slowdown, citing limits on easing of monetary policy, the property market correction, and lower demand for exports as the primary weights on China’s economy.
Muted ability of developed countries to stimulate their own economies will also factor into the slowdown by limiting capital flows into the region.
The Bank also warned that the US could be forced to tighten policy significantly
if current tax laws are allowed to expire. It said that the more developed economies in Asia were better positioned to weather a global slowdown since they have ample international reserves and have reduced their exposure to European banks and wholesale funding.
Bert Hofman, chief economist for the World Bank, cited the need to support social safety nets and for the necessity to be ready to supply economic stimulus as needed.