In its semi-annual 2023 Economic Update released on October 1, the World Bank downgraded its economic projections for ‘Developing East Asia and the Pacific,’ a group of countries and jurisdictions including China, Indonesia, Malaysia, the Philippines, and Vietnam, among others.
While the region is expected to sustain economic growth of five per cent in 2023, its momentum may slow in the second half of 2023. The dip, likely to be a knock-on effect of China’s slowdown, is expected to be even more pronounced in 2024, at 4.5 per cent.
With the exception of crises such as the 1997 Asian Financial Crisis and the COVID-19 pandemic, these are the most pessimistic projections for the region in more than 50 years. There remains, however, some optimism as the region continues to be among the “fastest-growing and most dynamic” regions globally, according to Manuela V. Ferro, East Asia and Pacific vice-president at the World Bank.
China’s spillover in East Asia
Beijing set one of its lowest growth targets ever in 2023, aiming for “around 5 per cent.” While the World Bank’s most recent growth estimate for China in 2023 held at 5.1 per cent, its outlook for China in 2024 dipped by 0.7 percentage points to 4.4 per cent.
The rest of the region, however, is expected to grow at around 4.6 per cent in 2024, with a global economic recovery expected to offset the spillover of China’s slowing growth.
China’s sluggish post-pandemic recovery, deepening property crisis, and dwindling private sector investment are likely driving its slow growth. The World Bank also flagged rising government, corporate, and household debt, not only in China but in Malaysia and Thailand, as reasons for its gloomier forecast.
Asia yet to meet pre-pandemic growth
East Asia’s forecast contrasts with South Asia, which is expected to grow by 5.8 per cent in 2023, before “slowing” to 5.6 per cent in 2024 and 2025. India is expected to grow at 6.3 per cent, and the Maldives, taking the lead, is projected to hit 6.5 per cent growth. However, like East Asia, South Asia’s growth has yet to rebound to pre-pandemic levels.