Washington: The World Bank has lowered its growth forecasts for East Asia and the Pacific to 5 per cent from 5.4 per cent forecast in October, and warned growth could slow to 4 per cent if conditions weaken further.
The latest outlook reflects a hit to the region from Russia’s attack on Ukraine, rising interest rates in the US and slowing growth in China. Ongoing supply chain shocks are continuing to hamper manufacturers and push up prices, the World Bank said in its Spring 2022 East Asia and Pacific Economic Update.
China, which accounts for 86 per cent of regional output according to the World Bank, is tipped to expand by 5 per cent in its baseline scenario and 4 per cent in the downside scenario. For the rest of the region, output is tipped to expand 4.8 per cent in the base case and 4.2 per cent in the downside scenario. The latter outcome would trigger 6 million more people remaining trapped in poverty at the $5.50 per day threshold, the development lender warned.
In its outlook, the Washington-based institution said regional firms that had already reported payment arrears will be hit by new supply and demand shocks. At the same time, real income for households will shrink as inflation soars and government debt will limit how fiscal policy makers can respond. Rising prices will also limit room for central banks to ease.
While these policy steps would cushion the hit to growth, the year ahead will be challenging, said the World Bank’s East Asia and Pacific Chief Economist Aaditya Mattoo. “This is going to be a hard year for the region, nobody is going to be immune to the shocks we described,” Mattoo said.
