Growth in the East Asia and the Pacific (EAP) region is projected to decelerate from 7.2 per cent in 2021 to 3.2 per cent this year—about two percentage points slower than was expected in April this year, according to the World Bank’s EAP Economic Update for October 2022.

The slowing growth is mostly due to China, where activity is projected to decelerate sharply to 2.8 per cent in 2022, after the 8.1 per cent rebound seen in 2021, owing to recurrent COVID-19 outbreaks, mobility restrictions and real estate sector stress.

Growth in the rest of the region is projected to rebound to 5.3 per cent this year from 2.6 per cent in 2021, and up from 4.8 per cent projected in April 2022.

According to the update, global growth and international trade are projected to be significantly lower than expected in April this year.

Financial conditions are also expected to be significantly tighter and more volatile than expected earlier.

Global commodity prices are expected to decline from their current highs but will remain significantly higher than before the war in Ukraine because of disruptions in production and trade, geopolitical tensions and lingering sanctions, the update said.

Export dependent economies like Cambodia, Malaysia, and Vietnam are particularly vulnerable to slowing global demand.

In contrast, a relaxation of border closures and the related recovery in tourism activity is expected to boost growth in the Philippines, Malaysia, Thailand and several tourism-dependent Pacific island countries, especially Fiji.

Countries with large external financing needs, either in the form of short-term capital (Cambodia, Indonesia and Malaysia), or because of high overall debt (Laos and Mongolia) are more vulnerable to the tightening of global financing conditions than are their peers.

Country-specific circumstances will continue to weigh on growth. Price pressures remain elevated, the external position is worsening, and instability and policy uncertainty persist in Myanmar.

This will prevent a strong recovery, following the estimated 18 per cent contraction in fiscal 2020-21.

EAP annual median headline inflation is now expected to surpass 5 per cent this year compared to 3 per cent expected in April this year. This implies that inflation will overshoot the upper band of the inflation target in several EAP economies, the update added.

Fibre2Fashion News Desk (DS)

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