The World Bank has raised its forecast for China's 2011 economic growth rate to 9 percent from 8.5 percent. It also said that the earthquake and tsunami's influence on the Japanese economy would be temporary.

But inflation is an issue that needs immediate attention in East Asia, the Washington-based bank said.

"China's economic prospects remain sound although some risks remain," the bank said in its latest East Asia and Pacific Economic Update. "The expansion should remain supported by healthy corporate and infrastructure investment and industrialization."

The main risk comes from inflation, it said yesterday.

China's Consumer Price Index, the main gauge of inflation, grew 4.9 percent annually in January and February but policymakers aim to ensure it is under 4 percent for the whole year.

"The ability to absorb commodity input price shocks in China is enhanced by the capacity for rapid productivity growth and by rising wages," the report said. "It helps to reduce the real impact of price shocks in food and fuel."

The People's Bank of China announced another reserve requirement ratio increase last Friday and set level at a record high of 20 percent. It was the third time this year that commercial banks had been ordered to set aside more money as reserves, together with one interest rate hike.

The World Bank predicted that the Japanese economy would slow as a result of the recent natural disasters. But growth should start picking up in the second half of this year as reconstruction efforts get under way.

"Clearly given Japan's importance in East Asia, the tragic events unfolding will be felt in the region," said Vikram Nehru, the bank's chief economist for the East Asia and Pacific region. "It's far too early to give an accurate assessment of the likely damage. But we expect the economic impact of this disaster on the region will be fairly short-lived."

The bank estimated an 8 percent growth in 2011 for East Asia, versus 9.6 percent last year.

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