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East Asia’s developing economies are facing a significant growth slowdown, with the World Bank revising its growth forecast for the region to one of the lowest rates in five decades. The primary reason cited for this gloomy outlook is the economic deceleration in China, the world’s second-largest economy.
The World Bank has notably lowered its growth projection for China for the upcoming year, with the forecast dropping to 4.4 percent, down from the previously estimated 4.8 percent in April. Remarkably, this projection falls even below China’s own growth forecast of five percent, as per the nation’s policymakers.
The downturn in China’s economic performance is attributed to a series of weak indicators, including a decline in retail sales, stagnant house prices, increased household debt, and lagging private sector investment, as reported by the Financial Times.
Furthermore, the World Bank has also downgraded its 2024 forecast for gross domestic product (GDP) growth in developing economies across East Asia and the Pacific. The new projection stands at 4.5 percent, a decrease from the earlier 4.8 percent forecast made in the first quarter of the current financial year.
This rate of growth is notably sluggish for a region that has historically been one of the world’s high-performing areas, with few exceptions such as the impacts of the coronavirus pandemic, the Asian financial crisis, and the global oil shock in the 1970s.
Aaditya Mattoo, World Bank chief economist for East Asia and the Pacific, highlighted the need for “deeper” service sector reforms to stimulate China’s expected growth. He emphasized that the next significant avenue for growth in a region that has thrived through manufacturing trade and investment will come from reforms in the services sectors to leverage the digital revolution.
Trade tensions between China and the United States have also played a significant role in the region’s economic challenges. In the past, Beijing benefited from tariffs imposed on Washington, which redirected demand for imports to other countries in the region, notably Vietnam. However, new regulations and trade dynamics have shifted the balance in favor of the United States, impacting various Southeast Asian nations.
The World Bank’s revised growth forecasts underscore the complex economic landscape that East Asia is navigating, highlighting the need for reforms and adjustments to address the challenges posed by a variety of economic factors, both domestic and international.
Sources By Agencies
