East Asia growth outpaces rest of world: World Bank – Global News (Trending Perfect)

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As inflation continues to impact global economies, the Asia-Pacific region is the only region that will see real salary growth in 2023, according to ECA International.

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Growth in the developing East Asia and Pacific region is outpacing the rest of the world, but the region is likely to see slower growth in 2024 amid headwinds in China and broader policy uncertainty, according to the World Bank.

“It's a region that continues to outperform the rest of the world, but is an underachiever compared to its own potential,” Aditya Mattoo, chief economist for the East Asia and Pacific region at the World Bank, told CNBC's “Street Signs Asia” on Monday.

Growth in the region is expected to ease to 4.5% this year, slowing from last year's expansion of 5.1%, according to the bank's 2024 East Asia and Pacific update, released on Monday. The region's population is more than 2.1 billion people.

However, excluding China, growth in the region is expected to reach 4.6% this year – higher than 4.4% in 2023.

“The outlook is subject to downside risks, which include a greater-than-expected slowdown in the global economy, higher long-term interest rates in major economies, increasing worldwide uncertainty about economic policies, and intensifying geopolitical tensions,” the report said. .

World Bank economists say the developing East Asia and Pacific region

While China has set an official growth target of about 5% for 2024, the World Bank expects growth in Asia's largest economy to moderate to 4.5% this year, slowing from last year's expansion of 5.2%. The slowdown in growth in the country is due to a decline in consumer confidence domestically, as well as high debt levels and a decline in the real estate sector.

All of this has led to a shift in production and investment away from China, which could eventually affect production in other countries such as Vietnam and Mexico, Mattu said.

“China is becoming very important to the region, as a source of inputs, a destination where the region's value-added products are ultimately consumed, and also a source of investment,” he told CNBC.

The report highlighted that many countries in the East Asia and Pacific region depend on external demand for export growth. “The importance of China as a final destination for domestic value added in the region has increased significantly since the early 2000s,” the report said, citing countries such as Malaysia, Thailand, Vietnam and Laos.

The report stressed that “several countries in the region are also at risk through trade links with economic activity in the United States and the European Union (Cambodia, Malaysia, Philippines, Thailand, and Vietnam).”

There are other factors limiting growth in the region.

“Trade is recovering globally, but at the same time, we see a wave of protectionist policies,” Mattu said.

“We are seeing an easing of financial conditions such that the inflation monster appears to have been tamed, but at the same time, we are seeing rising interest rates and an area where debt is significantly higher than it was before the pandemic.”

He added that “bold policy actions” were needed to “unlock competition, improve infrastructure, and reform education,” which could boost the region's economy.

On the other hand, if China can negotiate its transition to high-quality, sustainable growth and avoid protectionism with other players in the region – such as Malaysia, Indonesia, the Philippines and Vietnam – this could be a strong stimulus to growth, the economist believes. He said.

Last week, at the China Development Forum in Beijing, International Monetary Fund Executive Director Kristalina Georgieva claimed that “market-friendly reforms” could stimulate China’s growth “much faster than in the status quo scenario.”

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