World Bank data indicate that economic growth rates in developing countries in East Asia and the Pacific are currently exceeding similar results in the rest of the world.
At the same time, the experts of the mentioned financial institution warn that in the current year, a slowdown in positive dynamic economic development is likely to occur in the specified region. This point of view is based on the fact that the source of the negative impact will be the headwinds that are being fixed in China, where the recovery process after the coronavirus pandemic has not turned out to be as fast and successful as initially expected. In the context of forecasting the economic prospects of East Asia and the Pacific, the experts of the financial institution noted the problem of general policy uncertainty, which creates an unfavorable external environment in terms of development opportunities. Besides, so far there are no signs that the specified negative situation will improve in the foreseeable future.
Aaditya Mattoo, the World Bank’s Chief Economist for East Asia and the Pacific, said during a conversation with media representatives that this region is still ahead of the whole world. This implies the intensity of economic growth. At the same time, Aaditya Mattoo noted that in East Asia and the Pacific, there is what he described as an underachieving relative to its own potential.
Economic growth in the mentioned region is expected to be 4.5% in the current year. In this case, a slowdown in the process is predicted. In 2023, economic growth in East Asia and the Pacific was recorded at 5.1%. Expectations regarding the dynamic of the process are contained in the updated World Bank report, which was published on Monday, April 1. This report applies only to East Asia and the Pacific, which have a population of more than 2.1 billion people.
At the same time, excluding China, the World Bank expects economic growth of 4.6%. Last year, the figure in East Asia and the Pacific was 4.4%.
The World Bank also notes that the forecast is subject to downside risks. In this context, the experts of the financial institution draw attention to the slowdown in the global economy, which turned out to be more significant than preliminary expectations. Moreover, the report notes that another negative factor affecting development prospects is high interest rates in major economies. In this case, experts say that the cost of borrowing at maximum levels turned out to be longer. The World Bank report also draws attention to the lack of certainty about which policies financial regulators will implement in the foreseeable future. As another factor of negative impact, the growing tension in the plane of geopolitical relations is mentioned.
The Chinese authorities have set the country’s economic growth target for 2024 at about 5%. At the same time, World Bank experts say that this goal is highly likely not to be achieved. In their opinion, China’s economic growth in the current year will be fixed at 4.5%. It is worth noting that in 2023 this figure was 5.2%. The deterioration of the dynamic of the economic development of China is due to several factors. In this case, the decline in consumer confidence is of particular importance. Other factors affecting China’s economic performance are rising debt and the downturn in the real estate sector.
Aaditya Mattoo says that the specified negative circumstances have already provoked sensitive consequences for Beijing. According to him, against the background of the deteriorating state of affairs in China’s economic system, the tendency of relocation production from the country and diversifying investments is being fixed. The expert argues that the corresponding process may have an impact on manufacturing in other countries, including Mexico and Vietnam.
Aaditya Mattoo stated that China has become extremely important for Asia as a source of inputs, as a destination where value-added products are consumed, and as a source of investment.
The World Bank report notes that the growth of export indicators in many Eastern Partnership countries depends on external demand. In this context, the experts of the financial institution mentioned that since the early 2000s, the importance of China as the ultimate destination for domestic added value in the region has significantly increased. Malaysia, Laos, Vietnam, and Thailand were also mentioned as part of the ascertainment of a positive change in the status of Asian countries in the economic dimension.
Separately, the World Bank report notes the significant impact of the dynamic of the economic activity in the United States and the EU on Cambodia, the Philippines, and already the mentioned Malaysia, Vietnam, and Thailand. This interconnection has been formed in the context of trade linkages between countries.
Aaditya Mattoo also talks about other factors limiting the prospects for economic growth in East Asia and the Pacific. In this context, the expert stated that there is currently a process of restoring international trade, but at the same time, governments are showing a tendency to apply protectionist policies. He also noted that nowadays in many countries there is an improvement in the inflation situation, but interest rates continue to be high. Aaditya Mattoo separately underlined that the debt burden in East Asia and the Pacific has increased. In this case, it implies a comparison with the indicators that were recorded before the coronavirus pandemic.
Aaditya Mattoo says that East Asia and the Pacific need bold political actions to stimulate competition, improve infrastructure, and reform education. According to him, such decisions will become a factor in boosting economic development.
Aaditya Mattoo also said that the prospects for significant achievements will become a realistic scenario if China can agree on a transition to high-quality and sustainable economic growth and avoid protectionism with other players in the region, including Indonesia, the Philippines, Vietnam, and Malaysia.
Last week, Managing Director of the International Monetary Fund Kristalina Georgieva, during a speech at the China Development Forum held in Beijing, said that pro-market reforms could be a positive stimulus for the world’s second-largest economy. According to her, the mentioned strategy will accelerate growth faster than maintaining the status quo.
As we have reported earlier, World Bank Declares Importance of Much Faster Growth of Emerging Economies.
