World Bank: "East Asia's growth outpaces the rest of the world, but China drags the region down"

Economies in East Asia and the Pacific are expanding faster than the rest of the world, but growth in the region as a whole is likely to be weaker this year due to China's problems and uncertainty over economic policies, according to the World Bank. CNBC.

"It is a region that is still outperforming the rest of the world, but its results are below its potential," Aaditya Mattoo, the World Bank's chief economist for East Asia and the Pacific, said yesterday, according to the source. The bank estimates that the East Asia and Pacific economy will grow by 4.5 percent this year, down from last year's 5.1 percent expansion. However, excluding China, the region's economy is forecast to grow 4.6% this year, up from 4.4% in 2023.

"The outlook is subject to risks that include a slower-than-expected slowdown in the global economy, higher interest rates for a longer period of time in major economies, increased uncertainty around the world about economic policies and intensifying geopolitical tensions," it said. shows in the report.

China has set its official target for economic growth of around 5% this year, but the World Bank estimates that growth in Asia's largest economy will moderate to 4.5% in 2024 from 5.2 % last year. Among the factors that will slow China's economy are declining domestic consumer confidence, high levels of debt and the collapse of the real estate sector.

"All of this has led to a relocation of production and investment outside of China, which may eventually impact production in other countries such as Vietnam and Mexico," Mattoo said. "China has become very important for the region as a source of inputs, as a destination where the region's value-added products are consumed and also as a source of investment.

"According to the World Bank report, many of the countries in East Asia and the Pacific depend on foreign demand. "The importance of China as the final destination for added value realized in the region has increased significantly since the early 2000s," the report states, adding that countries such as Malaysia, Thailand or Vietnam depend on exports to China. "Also, several countries in the region are exposed, through the trade links they have, with the economies of the United States and the European Union (Cambodia, Malaysia, the Philippines, Thailand and Vietnam)", according to the report.

There are other factors limiting economic growth in the region, according to the World Bank.

"Trade is recovering globally, but at the same time we are seeing a number of protectionist policies," Mattoo said, quoted by CNBC. "We are seeing an easing of financial conditions as inflation appears to be subsiding, but at the same time we are seeing that interest rates are high and in the region the level of debt is significantly higher than it was before the pandemic."

The World Bank economist added that "bold policy actions" are needed to "favor competition, improve infrastructure and reform education," which can boost the region's economy.

Last week, the Director General of the International Monetary Fund, Kristalina Georgieva, stated at the China Development Forum in Beijing that "pro-market reforms" can stimulate the country's growth in a way "considerably faster than maintaining the current state of affairs ," according to CNBC.