The World Bank has lowered its growth forecast for China and warned that developing economies in East Asia are expected to experience their slowest rate of expansion in five decades. The downgrade in predictions reflects concerns surrounding China’s economic slowdown and how it may affect the region. The World Bank now expects China’s economy to grow by 4.4% in 2024, down from the previous forecast of 4.8%. It has also downgraded its growth forecast for developing economies in East Asia and the Pacific to 4.5% in 2024, compared to the previous estimate of 4.8% and the expected 5% rate for this year. The bank attributed the slowdown to weak indicators in China, such as falling retail sales, stagnant house prices, and increased household debt.
According to Aaditya Mattoo, the World Bank’s chief economist for East Asia and the Pacific, a transition to a more service-based economy is necessary for sustained growth. However, this shift has proven challenging for many developing Asian economies that have traditionally relied on property and investment-led growth. Mattoo emphasized the need for deeper service sector reforms and leveraging the digital revolution for future growth. The region has also been adversely impacted by softer global demand and US industrial and trade policies under the Inflation Reduction Act and the Chips and Science Act. These policies have disrupted supply chains and affected exports from countries in Southeast Asia, including China and Vietnam.
Southeast Asian countries are now taking steps to mitigate the negative effects of these policies. Indonesia, for example, is seeking fair treatment for its critical minerals, such as nickel, in US subsidies for green technology. Vietnam is lobbying for electric vehicle tax credit benefits from the US, especially after the recent upgrade in bilateral ties. The World Bank’s data also highlights the discriminatory nature of US policies that favor countries exempt from local content requirements, such as Canada and Mexico, leading to a decline in exports from Southeast Asian nations.
In conclusion, the World Bank’s revised growth forecasts reflect concerns over China’s economic slowdown and the broader impact on developing economies in East Asia. The bank emphasizes the need for deeper reforms in the service sector and leveraging digital technologies for future growth. Additionally, US trade policies have disrupted supply chains and affected exports from Southeast Asian countries. As a result, these countries are seeking fair treatment and exploring opportunities to mitigate the negative effects of protectionist measures.