World Bank: East Asia, Pacific Regional Growth to Accelerate as China Rebounds

The economies of the East Asia and Pacific region are expected to grow faster this year than in 2022 and remain generally more resilient than other economies around the world, despite the effects of the Corona pandemic and the Ukrainian war, according to Bloomberg.

In its updated economic forecasts for the region, issued on Friday, the World Bank expected that the economies of the East Asia and Pacific region would grow by about 5.1% in 2023, up from 3.5% in 2022.

The World Bank had expected, in estimates published last October, that the region’s economies would grow at a rate of 4.6% in 2023. The bank’s increase in the region’s growth expectations is mainly driven by expectations of an acceleration in the growth of China’s economy, which is likely to reach 5.1% this year, an increase From 4.5% in forecasts issued six months ago.

In the near term, growth depends on what the global economy as a whole will achieve, which is expected to slow in 2023 on an annual basis, as well as on commodity prices that have begun to stabilize somewhat, in addition to fiscal tightening policies that will apparently continue as they are with continued high inflation in the United states.

The World Bank report showed that the banking sector in the East Asia and Pacific region may maintain its resilience to some extent in the face of global pressures, as the financial sectors are well capitalized, with the exception of Vietnam.

In general, investors supported a relatively optimistic view of the region's near-term outlook, favored buying stocks in emerging Asian countries, and boosted foreign direct investment compared to other parts of the world.

The World Bank analysts explained in the report that the situation looks more difficult in the long term.

Officials in the East Asia and Pacific region face “the main challenges of deglobalisation; aging; and climate change. The region is particularly vulnerable to these challenges, given that it has prospered through trade, while experiencing a rapidly aging population, and is both a victim and a contributor to climate change.”

Particularly pressing are demographic challenges, which have weakened the strength of labor markets. The region is home to some of the lowest fertility rates in the world, including South Korea, China and Thailand.

The publication of the new World Bank report today, Friday, follows the publication of a report earlier this week, in which it lowered the expected growth rate for the global economy until the end of the current decade.

The so-called “speed cap,” or the maximum long-term growth rate that does not lead to inflation, is likely to slow to a three-decade low between 2022 and 2030, according to the bank’s estimates.

The World Bank called for policies that analysts say will help reverse the current trend, including ways to boost labor supply and productivity, and increase investment, especially in vital sectors that mitigate the effects of climate change.