East Asia and Pacific economies remain broadly more resilient than other regions and should grow faster this year than in 2022, even with scars of the pandemic and war, the World Bank said.
(Bloomberg) — East Asia and Pacific economies remain broadly more resilient than other regions and should grow faster this year than in 2022, even with scars of the pandemic and war, the World Bank said.
The region’s economies are set to grow around 5.1% this year from 3.5% in 2022, the development bank said in its economic outlook update for the region released Friday. That’s up from a 4.6% estimate for 2023 that the World Bank published in October, mainly owing to a faster projection for China, which is now seen growing 5.1% this year instead of 4.5% six months ago.
That near-term growth will depend on global output that’s expected to slow this year from 2022; commodity prices, which are moderating; and financial tightening set to continue amid still-high US inflation. The region’s banking sector should remain fairly resilient in the face of global stresses, with financial sectors judged to be well-capitalized except for Vietnam, the report showed.
“The damage done by the pandemic, war, and financial tightening to people, firms, and governments, threatens to reduce growth and increase inequality,” according to the report.
Overall, though, the relatively upbeat view of the region’s near-term prospects has been shared by investors, who have favored emerging Asia equities and boosted foreign direct investment over other parts of the world.
Yuting Shao, Hong Kong-based macro strategist at State Street Bank & Trust Company, is among those remaining long on EM Asia equities largely due to her expectation of more positive spillover from China.
“Asia is relatively more insulated from the overall negative risk sentiment toward the emerging markets in terms of positioning,” Shao said March 22 on Bloomberg Radio. “We’re still seeing relatively resilient flows into the EM Asia region.”
Longer-term, the landscape is more challenging, as the World Bank analysts outline in the report.
East Asia and Pacific officials face “the major challenges of de-globalization, aging and climate change — to which it is particularly susceptible because it has thrived through trade, is growing old fast, and is both a victim of and contributor to climate change.”
Especially pressing are demographic challenges that have limited the firepower in labor markets. The region is home to some of the world’s weakest fertility rates, including in South Korea, China, and Thailand.
Friday’s release follows a World Bank report published earlier this week that outlined a step-down in the global economy’s potential growth through the end of this decade.
The so-called “speed limit” — or the maximum long-term growth rate that doesn’t spark inflation — is set to slow to a three-decade low during 2022-30, according to the estimates.
The World Bank has advocated for policies that the analysts say would help reverse that trend, including ways to boost labor supply, enhance productivity, and raise investment especially in critical sectors that curb effects of climate change.
The development bank’s semi-annual meetings, alongside the International Monetary Fund, will be held April 10-16 in Washington.
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