- The World Bank now expects developing countries in East Asia and the Pacific to grow by 5% this year, compared with 5.1% previously.
- For 2024, the organization expects growth in the region to be 4.5%, compared with 4.8% previously.
- Growth risks include rising debt levels for governments, businesses, and households.
Cityscape of skyscrapers at dusk as seen from Victoria Peak in Hong Kong, China, July 23, 2023.
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The World Bank has cut its growth forecast for the developing regions of East Asia and the Pacific, citing weak demand in China and the rest of the world due to still high interest rates and weak trade.
The World Bank said it currently expects developing countries’ economies to: East Asia and the Pacific region to grow by 5% It will be in 2023, according to an October report released in Asia on Monday. This is slightly lower than the 5.1% expected in April. The Washington-based multilateral bank now expects growth in the region to be 4.5% in 2024, down from its April forecast of 4.8%.
The World Bank has kept its forecast for China’s economic growth rate in 2023 unchanged at 5.1%, but has lowered its forecast for 2024 to 4.4% from 4.8%. The agency cited “long-term structural factors,” rising debt levels in the world’s second-largest economy and a weak real estate sector as reasons for the downgrade.
“Domestic factors are likely to have a dominant impact on growth in China, while external factors will have a stronger impact on growth in much of the rest of the region,” the World Bank said. Ta.
Although East Asian economies have largely recovered from a series of shocks since 2020, including the coronavirus pandemic, and will continue to grow, the World Bank said the pace of growth is likely to slow.
The World Bank warned of a significant increase in general government debt and a rapid rise in corporate debt levels, particularly in China, Thailand and Vietnam.
It warned that high levels of government debt could limit both public and private investment. Rising debt could lead to higher interest rates, which could increase borrowing costs for private companies.
According to World Bank calculations, a 10 percentage point increase in general government debt as a percentage of GDP is associated with a 1.2 percentage point decline in investment growth. Similarly, a 10 percentage point increase in private debt as a share of gross domestic product (GDP) is associated with a 1.1 percentage point decline in investment growth, the report said.
The bank also noted that household debt in China, Malaysia and Thailand remains relatively high compared to other emerging markets. Higher household debt can have a negative impact on consumption, as more income is devoted to debt servicing, which can lead to lower spending.
According to the World Bank, a 10 percentage point increase in household debt reduces consumption growth by 0.4 percentage points.
The World Bank said household spending in the developing East Asia and Pacific region remains below pre-pandemic trends.
In China, the current retail sales trend is likely to be more flat than before the pandemic due to structural factors such as falling house prices, slowing household income growth, rising reserve savings and household debt, as well as an aging population. It has become.