East Asia and Pacific GDP growth to slow to 4.8% in 2024 – World Bank

SINGAPORE (ICIS)–Economic growth in the East Asia and Pacific (EAP) region is projected to slow to 4.8% in 2024 from 5.1% in the previous year, primarily due to a deceleration of activity in China, the World Bank said.

• Downside risks to regional outlook remain
• China 2024 GDP growth to slow to 4.8%
• Global growth to stabilize at 2.6%

Excluding China, growth in the region is expected to accelerate to 4.6% this year from 4.3% in 2023, bolstered by a recovery in global trade, the World Bank said in its June World Economic Prospects report released on 11 June.

Over the next two years, the overall EAP GDP growth is projected to continue moderating to 4.2% in 2025 and 4.1% in 2026, as a further slowdown in China, Asia’s biggest economy and the second largest in the world, offsets a modest pick-up elsewhere in the region.

“Although risks to the regional outlook have become somewhat more balanced since January, they remain tilted to the downside,” the World Bank said

“Downside risks include a proliferation of armed conflicts and heightened geopolitical tensions around the world, further trade policy fragmentation, and weaker- than-expected growth in China, with adverse spillovers to the broader region.”

However, faster-than-anticipated US growth could provide a positive counterbalance to these risks, potentially boosting regional activity.

CHINA GROWTH SLOWS
GDP growth for China this year was revised up to 4.8% from 4.5% previously, primarily due to stronger-than-expected activity in the early part of the year, particularly, exports.

The forecast represents a slowdown from the 5.2% pace of expansion recorded in 2023.

Consumption, however, is expected to slow down significantly this year amid weak consumer confidence following a strong expansion in 2023.

Overall investment growth will remain subdued, supported by government spending, notably on infrastructure, but dampened by continued weakness in the property sector.

Real estate activity is not expected to stabilize until the end of the year despite measures to support the sector, such as lower borrowing costs and deposit requirements.

Both new property construction starts and bank lending for real estate were continuing to decline since the start of the year.

For 2025, China’s growth is projected to soften further to 4.1%, lower than the previous forecast of 4.3%, mainly due to a weaker outlook for investment.

A further deceleration to 4.0% is expected in 2026 as potential growth is hampered by slowing productivity, softer investment, and increasing demographic challenges, according to the World Bank.

“With the population falling for the second consecutive year in 2023, and amid a low and declining fertility rate, demographic headwinds are expected to intensify, dragging potential growth lower,” the multilateral institution stated.

EX-CHINA GROWTH REBOUNDS
In the EAP region excluding China, economic activity is projected to rebound this year, following below-average growth in the previous year.

This growth will be driven by an upswing in global goods trade, benefiting exports and industrial activity, and offsetting the effects of slowing growth in China.

The strongest acceleration in activity is expected in export-oriented economies such as Thailand and Vietnam in southeast Asia.

Additionally, the ongoing global tourism recovery from the pandemic, which was delayed in some EAP countries, will continue to boost service exports in economies such as Cambodia and Thailand.

GDP growth in the EAP excluding China next year is expected to edge up to 4.7% and further up to 4.8% in 2026, as global trade strengthens and growth rates across the region converge towards their potential.

GLOBAL GROWTH FORECAST STABLE
World economic growth is projected to remain at 2.6% in 2024, marking the first time in three years that the pace of expansion will be stable despite ongoing geopolitical tensions and high interest rates.

A modest increase to 2.7% is expected in 2025-2026, supported by moderate growth in trade and investment, based on World Bank’s projection.

“Global risks remain tilted to the downside despite the possibility of some upside surprises. Escalating geopolitical tensions could lead to volatile commodity prices, while further trade fragmentation risks additional disruptions to trade networks,” it said.

“Pronounced trade policy uncertainty – already at its highest level compared with other years of major elections since 2000 – could portend further trade restrictions and weigh on global trade.”

While global inflation is projected to ease, the pace of moderation is slower than previously anticipated, averaging 3.5% this year.

Due to persistent inflationary pressures, central banks in both advanced economies and emerging markets are expected to maintain a cautious approach to monetary policy easing.

Consequently, average benchmark policy interest rates are projected to remain roughly double the 2000-19 average over the coming years.

Focus article by Nurluqman Suratman