East Asian economies are expected to register their fifth consecutive year of strong growth in 2006, backed up by a substantial decline in poverty, according to the World Bank's latest East Asia Update launched on Monday.

But this growth is also expected to somewhat slow down in the near future, reflecting a likely faltering U.S. growth rate in 2007, and a consequent drop in exports from East Asia to the United States, the biannual report said.

The report shows that growth in the countries of Emerging East Asia is likely to reach around 8 percent in 2006, the second strongest rate in the five-year long economic expansion underway in the region.

As a whole, East Asia has bounced back from the 1997 financial crisis, and has lifted some 25 million people out of extreme poverty since 2005, the report said.

It estimated that the number of people in East Asia living on or below two dollars a day will fall to around 550 million, or 29.3 percent of the population in 2006.

According to the report, China's rapid economic growth at a growth rate above 10 percent is underpinning the region's overall GDP growth. World Bank statistics show that China's imports from the rest of Emerging East Asia were up about 20 percent in the first three quarters of 2006, at about the same rate as in 2005.

The report said that strong export growth has been a common feature sustaining activity throughout the region. But it noted that domestic consumption and investment performance has been a lot more varied, reflecting the impact of higher oil prices and higher domestic interest rates in the first half of 2006, among other factors.

"We may have seen the peak in oil prices and interest rates in the region," said Homi Kharas, the World Bank's chief economist for East Asia and the Pacific. "So the prospects are good for domestic demand to strengthen and to offset weaker exports," he added.

The Update also finds that foreign exchange reserves in Emerging East Asia continue to accumulate, rising to over 2 trillion dollars at present.

The region's rising current account surplus -- up to over 300 billion U.S. dollars in the second quarter of 2006 -- continues to finance the share of foreign exchange reserves growth, said the report.

The report notes that East Asia is stepping towards a middle-income region. "Once Vietnam reaches middle income country levels, possibly as early as 2010, more than nine out of ten East Asians will live in a middle-income country." said the report.

But as the report warns, this poses new challenges for the region, especially in how this new wealth is managed.

The report also noted growing inequality in much of developing East Asia, not just in income levels, but also in schooling and access to basic services. Despite successful global integration and increasing regional integration, many East Asian countries are falling behind in domestic integration.

The report urges the region to pay attention to the problems of rapid urbanization, service delivery, social cohesion and corruption, so as to address those challenges.

The report also has a special focus on the 450 million youth in the region and discusses the challenge of how to prepare this group to become the drivers of future growth. It also notes the high and rising returns on higher skills and the importance of connecting school and work.

Source: Xinhua