PHNOM PENH: Manufacturing as a share of output has peaked in most developing East Asia and Pacific economies except for Cambodia and Vietnam, the World Bank says.
In its April update released in Washington Thursday, the bank noted that East Asia and the Pacific went through two decades of faster and less volatile growth than other economies until about 25 years ago.
But after the Asian financial crisis of 1997-98, “the region saw only limited structural reforms and therefore little productivity-enhancing structural change,” it said. And despite being open to trade and investment in manufacturing, the region remained “reluctant” to liberalize service sectors.
As a result, productivity growth in many regional economies has been declining since the global financial crisis of 2008-09. “Limited growth in labor productivity had been driven more by capital deepening than total factor productivity growth,” the bank said.
“These trends in growth and productivity have coincided with a shift in the pattern of structural change.”
In the decade between the Asian and global financial crises, “the share of manufacturing in GDP peaked and began to decline in the early industrializers. “Still-industrialising Cambodia and Vietnam were the exceptions to this trend.”
According to the bank, shifts in labor so far this century have generally not favored productivity growth in the region. “In major countries in recent years, workers moved mostly from least productive agriculture to below-average productivity services sectors, and not much to the most productive manufacturing and services sectors.”
Such lower productivity may reflect “informatization and overcrowding among workers migrating from rural to urban areas. But “in Cambodia, Vietnam, and until recently, Myanmar, which is still industrializing, movement out of agriculture was accelerating and oriented towards relatively high productivity manufacturing and services,” the bank said.
Cambodia’s GDP forecast for this year is unchanged at 5.2 percent.
The April update meanwhile left Cambodia’s GDP growth forecast for this year unchanged from October at 5.2 percent — the fastest pace of expansion in developing East Asia after Vietnam and the Philippines.
At the same time, the bank upwardly revised forecasts to 5.1 percent for China (up from 4.5 percent), 3.9 percent for Laos (up from 3.8 percent), and 4.3 percent for Malaysia (up from 4.2 percent).
But it revised downwards forecasts to 4.9 percent for Indonesia (down from 5.1 percent), 5.6 percent for the Philippines (down from 5.8 percent), 3.6 percent for Thailand (down from 4.1 percent), and 6.3 percent for Vietnam (down from 6.7 percent).
For Myanmar, the bank forecasted a GDP growth of 3.0 percent this year. No forecast was available in October.