World Bank Trims Asia Forecast but Says no China Hard Landing

The World Bank on Monday cut its growth forecasts for developing economies in East Asia and the Pacific but allayed fears of a hard landing for China's slowing economy.

The bank also said it expects any increase in U.S. interest rates to have an orderly impact but warned of a risk that markets could react sharply, causing currencies to depreciate further in the region.

In a report on 14 economies led by China, the bank called on the countries to mitigate the impact of the slowing Chinese economy and an increase in U.S. interest rates by adopting "prudent macro-economic management" and deeper structural reforms.

"The baseline growth projections for China assume a further gradual slowdown in 2016-17," the bank said, allaying concerns that the world's second largest economy could experience an abrupt slowdown following recent stock market turmoil and a softening manufacturing sector.

"China has sufficient policy buffers to address these risks and prevent a sharp slowdown," it said.

In its updated outlook for the region, the bank said China's gross domestic product (GDP) is expected to grow by 6.9 percent this year, moderating to 6.7 percent next year and 6.5 percent in 2017. China's GDP rose 7.3 percent in 2014.

The forecasts were slightly lower than the bank's projections made in April.

For developing economies in the East Asia-Pacific region, average growth is forecast at 6.5 percent this year, 6.4 percent next year and 6.3 percent in 2017. This is down from 6.8 percent actual growth in 2014.

"This reflects mainly a moderate slowdown in China," the bank said.