Developing economies in Asia have mostly regained ground lost during the COVID-19 pandemic, but are seeing their recoveries stall as productivity lags, the World Bank said in a report released yesterday.
The report forecasts that growth in the region, including China, would pick up pace this year after the world’s No. 2 economy relaxed pandemic restrictions on travel and other activities.
However, recoveries elsewhere in the region would moderate as pressures of inflation and growing household debt slow consumer spending, it said.
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Across the Asia-Pacific region, economies are expected to grow 5.1 percent this year, up from 3.5 percent last year, the report said.
However, not including China, growth is expected to slip to 4.9 percent this year, after a rebound from the worst of the pandemic of 5.8 percent last year, it said.
Major Asian economies such as Indonesia, the Philippines, Thailand and Vietnam would see their recoveries slow, while facing risks from weakening global growth, spillover from the war in Ukraine and climate change-induced disasters.
Demand for exports from the region has slowed, as the US Federal Reserve and other central banks have targeted inflation by hiking interest rates, making it more costly to buy on credit or get mortgages.
Meanwhile, the Chinese economy has slowed significantly in the longer term, even as it bounces back from the disruptions caused by the pandemic.
Private economists have also cut their forecasts for growth in the region this year, citing the possibility that the tighter monetary policies might bring on recessions in the US or other major economies.
Many countries in the region are grappling with onerous debt loads after spending heavily during the pandemic, while households also borrowed heavily.
“Once pent-up demand from post-lockdown fades, we think that Asian economies will settle at lower GDP growth and higher inflation than our pre-pandemic forecasts,” Oxford Economics senior economist Sung Eun Jung said in a report.
The region has made huge strides in alleviating poverty, but progress toward higher incomes and reducing inequality has stalled due to a slowing of reforms and productivity gains, the World Bank report said.
However, countries need to address long-standing needs for reform, such as investing more in education and public health, to improve productivity and spur sustainable growth, it said.
“Most major economies of East Asia and the Pacific have come through the difficulties of the pandemic but must now navigate a changed global landscape,” World Bank East Asia and Pacific vice president Manuela Ferro said in a statement. “To regain momentum, there is work left to do to boost innovation, productivity, and to set the foundations for a greener recovery.”
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