N. Korea tension a threat to Asian growth: World Bank

Commuters make a long line on a highway in Jakarta on September 20, 2017, with the under construction sky-train line (back) being prepared to solve the traffic problem. Indonesia’s central bank made a surprise 25 basis point rate cut to interest rates as Southeast Asia’s largest economy seeks to boost growth, Bank Indonesia governor Agus Martowardojo said at a press conference last month. (BAY ISMOYO / AFP)

(AFP) - The World Bank warned Wednesday that surging tensions over North Korea's nuclear programme could be a threat to robust growth in Asia.

The bank predicted that developing East Asia and the Pacific would expand 6.4 percent this year, 6.2 percent next year and 6.1 percent in 2019, slightly better than their last forecasts in April.

"Developing East Asia and the Pacific is doing better than most other developing regions of the world and is likely to continue to do so," said Sudhir Shetty, the bank's chief regional economist.

He cited "a favourable external environment and robust domestic demand" for the improved picture in the institution's latest report.

But Shetty warned that tensions over North Korea could dent the positive momentum.

Pyongyang has ramped up its weapons programme, conducting its sixth nuclear test and firing two missiles over Japan, and leader Kim Jong-Un has been engaged in a heated war of words with US President Donald Trump.

The tensions "have the potential to affect trade as well as the availability and access to external finance," Shetty said, speaking to reporters via videolink from Bangkok.

"Since one of the channels for their impact is through trade, they will have significant impact on Asia which is reliant on trade and supply chains."

He added that "an intensification of tensions in the region could make capital flows and exchange rates more volatile and raise global interest rates".

Rising protectionism in the US under Trump and uncertainty caused by Britain's looming exit from the European Union were also threats, the bank warned.

China, the world's second-biggest economy, is expected to expand 6.7 percent this year, easing to growth of 6.4 percent next year and 6.3 percent in 2019 as the economy rebalances away from external demand toward domestic consumption, the report said.

Southeast Asia's five biggest economies should see growth of 5.1 percent this year and 5.2 percent in 2018 and 2019, slightly higher than April's forecasts.

© Agence France-Presse