Daily Management Review

Due To A Slowing China, The World Bank Lowers Its Prediction For Development In Developing East Asia


Due To A Slowing China, The World Bank Lowers Its Prediction For Development In Developing East Asia
In light of a slowing China, weak global demand, persistently high interest rates, and sluggish trade, the World Bank lowered its growth prediction for developing East Asia and the Pacific.
According to the World Bank's October report, which was released on Monday in Asia, it now anticipates that developing economies in East Asia and the Pacific would rise by 5% in 2023. That is a little less than the 5.1% prediction it made in April. The Washington-based international bank has lowered its prediction for the region's GDP in 2024 from 4.8% to 4.5%.
The World Bank maintained its 5.1% forecast for China's economic growth in 2023 but cut its expectation for 2024 from 4.8% to 4.4%.
The organization's downgrading was justified by "longer-term structural factors," high debt levels in the second-largest economy in the world, and difficulties in the country's real estate market.
“While domestic factors are likely to be the dominant influence on growth in China, external factors will have a stronger influence on growth in much of the rest of the region,” the World Bank said.
Even while East Asian economies will continue to develop and have largely recovered from the slew of shocks that have occurred since 2020, including the Covid-19 outbreak, the World Bank predicted that the rate of growth will likely decline.
The World Bank highlighted the sharp rise in corporate debt levels as well as the large increase in general government debt, particularly in China, Thailand, and Vietnam.
It issued a warning that high levels of public debt could restrict both public and private investment. According to the report, more debt may result in higher interest rates, which would raise the cost of borrowing for private enterprises.
A 10-percentage-point increase in the general government debt to GDP is calculated by the World Bank to be related to a 1.2-percentage-point drop in investment growth.
Similarly, it noted that a 10-percentage-point rise in private debt as a proportion of GDP is linked to a 1.1-percentage-point reduction in investment growth.
In comparison to other emerging countries, the bank also noted that household debt levels in China, Malaysia, and Thailand were relatively high. High levels of household debt can have a detrimental effect on consumption because they would require more money to pay off, which might force budget adjustments.
According to the World Bank, a 10-percentage-point increase in household debt would result in a 0.4-percentage-point decline in consumption growth.
Currently, according to the World Bank, household expenditure in the developing East Asia and Pacific region is still below pre-pandemic averages.
Due to declining home values, sluggish household income growth, higher precautionary savings and household debt, as well as other structural issues like an ageing population, China's retail sales trend is currently flatter than it was before to the epidemic.s