In its East Asia and Pacific Economic Update, the body also said Asian currencies could return to a path of appreciation if capital flows picked up, although it noted they were likely to be volatile in the short term on the back of European concerns.
Bert Hofman, chief economist for the East Asia and Pacific region at the World Bank, highlighted that Asian domestic demand had shown itself to be resistant to shocks, and noted that many countries had current-account surpluses and high levels of international reserves, and that banks were largely well-capitalized.
"Most East Asian economies are well positioned to weather renewed volatility," he said.
But the report acknowledged there were limits to this resilience.
"While some countries may have space for further policy stimulus in the event of another major disruption in the external environment, public debt remains above pre-crisis levels in many countries, limiting options for expansionary fiscal policy, while overheating concerns may limit further monetary loosening," the report found.
The body defines developing East Asia as: Cambodia, China, East Timor, Fiji, Indonesia, Laos, Malaysia, Mongolia, Papua New Guinea, the Philippines, the Solomon Islands, Thailand and Vietnam.
The World Bank forecast the region to grow 7.6% in 2012 and 8.0% in 2013, below 8.2% in 2011. While that expected weakening is largely due to China--with growth excluding the world's second largest economy tipped to pick up to 5.2% in 2012 and 5.6% in 2013 from 4.3% in 2011--it said the improvement elsewhere in the region was mostly linked to a rebound following flooding in southeast Asia.
The organization noted that some central banks in the region had begun easing monetary policy to support activity, but cautioned that potential risks to inflation shouldn't be overlooked. Although oil futures prices have fallen, sanctions against Iran could cause significant supply disruption in coming months, it noted.
"An uptick in activity, aided by accommodative monetary policies, also poses an upside risk to inflation, so policy- makers should be prepared to reverse recent easing," the report said.
It added fiscal policy would need to walk "a fine line" between short-term growth and medium-term sustainability, noting while many countries lowered their debt levels last year, several still had debts in excess of 40% of GDP, and Cambodia and Malaysia's rose.
It urged Asian nations to reduce their dependence on external demand by boosting household consumption or investment.
The report also addressed China's decreasing current-account surplus. While a gap of less than 3% of gross domestic product suggests the Chinese yuan is closer to equilibrium than previously, it remains to be seen whether the surplus will rebound once global economic growth strengthens, the World Bank pointed out.
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