World Bank slashes 2023 growth forecast for East Asia and Pacific to 5%

World Bank said that while China is expected to grow at 5.1% this year, up from 3% in 2022, the rest of the countries in the region are expected to see a slowdown

The World Bank on Monday slashed the growth forecast for the East Asia and Pacific (EAP) region to 5 per cent from its April forecast of 5 per cent. It said that while China is expected to grow at 5.1 per cent this year, up from 3 per cent in 2022, the rest of the countries in the region are expected to see a slowdown to 4.6 per cent from 5.8 per cent.

However, among the region, the Pacific countries are expected to grow at a higher 5.2 per cent.

In 2024, the EAP region has been projected to grow by 4.5 per cent.

"While domestic factors are likely to be the dominant influence on growth in China, external factors will have a stronger influence on growth in much of the rest of the region," the World Bank said in its East Asia and the Pacific Economic Update.

"Growth in China is projected to slow to 4.4 per cent in 2024, as the bounce back from the re-opening of the economy fades and both proximate problems, such as elevated debt and weakness in the property sector, as well as longer-term structural factors, weigh on growth,"

It further said that the growth in the rest of the region is expected to edge up to 4.7 per cent in 2024, as easing global financial conditions and the recovery in the global economy offset the impact of slowing growth in China.

Services central to the development of EAP

The report also said that in the medium and long term, the services sector will be central to EAP's development. The recent development of the East Asia region has been attributed to a strong manufacturing sector, yet "services are playing a growing, but often underappreciated role as key drivers of economy-wide growth and job creation".

It said that in this region, the share of the service sector in employment has been rising since 2010. Moreover, they play a big role in foreign direct investment (FDI) in East Asia. Also consumer demand has also been shifting towards services as incomes rise and the population ages.

"Changes in technology and services policy have shaped and will influence the evolution of services and their contribution to development," the report added.

According to the World Bank, "equipping workers with the relevant skills must be a priority" to get the most out of the service sector boom. 

"The use of new digital technologies and reforms in education and health services, could help address the skills deficit as well as the inequality of access and quality across the region, and equip more EAP citizens to engage productively in the new digital economy," it said.