The Washington DC-based World Bank has downgraded Malaysia’s growth forecast this year by 0.3 points to 4.4.

PETALING JAYA: The Washington DC-based World Bank has downgraded Malaysia’s growth forecast this year by 0.3 points to 4.4%.

The international financial institution has posted the biggest downgrades in growth forecasts in the region for the country and Indonesia, both commodity exporters. Indonesia’s estimate for this year was lowered by 0.2 percentage points to 5.1%.

The largest forecast upgrade was for Thailand, with the World Bank now projecting an expansion of 2.5% this year, up from 2% in the earlier report.

However, it noted that growth in developing economies in East Asia was holding up despite tough global conditions and a slowdown in China. It has only lowered the growth forecast this year for developing East Asia and Pacific countries marginally to 6.3% from 6.4%. The region grew an estimated 6.5% last year.

It said developing nations in East Asia from Indonesia to China have benefited from careful economic policies, although global risks were considerable and threaten the region's outlook. It added that among the risks were a slowdown in high-income countries, a slump in exports and financial market volatility.

“Policy makers have less room to manoeuvre,” Sudhir Shetty, chief economist of the World Bank's East Asia and Pacific region, said in a statement. “Countries should adopt monetary and fiscal policies that reduce their exposure to global and regional risks, and continue with structural reforms to boost productivity and promote inclusive growth.”

The World Bank has maintained China’s growth forecast for the year at 6.7%, unchanged from the October estimate. Excluding China, it said the region's economy would grow 4.8% this year, up from 4.7% in 2015 and 0.1 percentage point lower than previously predicted.

Sudhir said China “is slowly moving toward more sustainable growth with less reliance on industrial exports. At the same time, the economy is creating a substantial number of jobs, partly because some manufacturers are moving production to other parts of China instead of lower-cost countries”.

“Many jobs are moving across China, away from the coastal areas,” he said. “The quality of infrastructure is orders of magnitude better than those in other countries, and it helps compensate for the higher wages.”

With developing nations in East Asia and the Pacific accounting for about 40% of world growth in 2015, the global economy is too reliant on the region to drive demand, Sudhir said.

“It's not good to have a plane flying on one engine,” he said. “The global economy would be much better off with multiple sources of growth.”