In a recent report released by the World Bank, East Asia and Pacific (EAP) economies are showcased as beacons of growth, surpassing global averages. However, the region faces impending headwinds, notably from China, casting a shadow over its growth trajectory for 2024.
Aaditya Mattoo, the World Bank’s Chief Economist for East Asia and Pacific, highlighted the region’s resilience amid global economic turbulence. Despite outperforming the world average, Mattoo emphasized that East Asia’s growth still falls short of its true potential.
According to the World Bank’s EAP update for 2024, the region is anticipated to experience a slight slowdown, with growth expected to ease to 4.5% this year, down from 5.1% in the previous year. Notably, excluding China, other EAP economies are poised to maintain growth at 4.6%, a marginal improvement from 2023.
However, the report underscores several downside risks, including a global economic slowdown, prolonged high interest rates in major economies, policy uncertainties, and geopolitical tensions. Despite China’s official growth target of 5%, the World Bank projects a moderation to 4.5% growth in Asia’s largest economy, attributing this slowdown to domestic factors such as waning consumer confidence and challenges in the real estate sector.
Mattoo highlighted the ripple effects of China’s economic shifts, particularly the relocation of production and investment, which could impact neighboring economies like Vietnam and Mexico. He emphasized China’s evolving role as a pivotal source of inputs, consumption destination, and investment hub for the region.
Moreover, the report emphasizes the intricate trade interdependencies within the EAP region, with many countries heavily reliant on external demand for export growth. China’s significance as a final destination for value-added goods from countries like Malaysia, Thailand, Vietnam, and Laos has amplified over the years. Additionally, countries such as Cambodia, Malaysia, the Philippines, Thailand, and Vietnam are exposed to economic activities in the US and EU through trade linkages.
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