This article first appeared in The Edge Financial Daily, on April 12, 2016.

KUALA LUMPUR: World Bank has trimmed Malaysia’s gross domestic product (GDP) growth forecast to 4.4% in 2016, from 4.5% it projected in October last year.

In its latest report, World Bank said the weaker demand from China and low commodity prices will constrain growth and public spending in Malaysia.

“In Malaysia, growth will slow to around 4.4 % in 2016 and 2017, as consumption growth remains subdued, while the commodity downturn and its impact on government revenues limit the scope for public sector spending,” it wrote.

In a statement issued in conjunction with the release of the report yesterday, World Bank said growth in the developing economies in East Asia and Pacific has remained resilient and is expected to ease only modestly during 2016 to 2018.

The bank cautioned that the economic outlook is subject to elevated risks and countries should continue to prioritise monetary and fiscal policies that reduce vulnerabilities and strengthen credibility, while deepening structural reforms.

World Bank also pointed out that growth in developing East Asia is expected to ease from 6.5% in 2015 to 6.3% in 2016 and 6.2% in 2017 to 2018.

“The forecast reflects China’s gradual shift to slower, more sustainable growth, expected to be 6.7% in 2016 and 6.5% in 2017, compared with 6.9% in 2015,” it explained.

“This is an important moment for developing East Asia and Pacific. The region accounted for almost two fifths of global growth in 2015, more than twice the combined contribution of all other developing regions,” said incoming World Bank East Asia and Pacific regional vice-president Victoria Kwakwa.

“The region has benefited from careful macroeconomic policies, including efforts to boost revenue in commodity-exporting countries. But sustaining growth amid challenging global conditions will require continued progress on structural reforms,” she added.

Meanwhile, World Bank said the region’s developing countries, excluding China, grew by 4.7% in 2015, and the pace of growth will pick up slightly — to 4.8% in 2016 and 4.9% in 2017 to 2018 — driven by growth in the large Southeast Asian economies.

However, it said the outlook for individual countries varies, depending on their trade and financial relationships with high-income economies and China, as well as their dependence on commodity exports.

“Among the large developing Southeast Asian economies, the Philippines and Vietnam have the strongest growth prospects, both expected to grow by more than 6% in 2016. In Indonesia, growth is forecast at 5.1% in 2016 and 5.3% in 2017, contingent on the success of recent reforms and implementation of an ambitious public investment programme,” it said.

“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,” said World Bank’s East Asia and Pacific region chief economist Sudhir Shetty.

“At the same time, policymakers have less room to manoeuvre in setting macroeconomic policy,” Sudhir  added.