According to the ADB, after a strong recovery in 2021, growth in the East Asia and Pacific region slowed markedly in 2022, to an estimated 3.2%, which is 1.2% lower than the previous forecasts.
The slowdown in growth was almost entirely due to China (accounting for about 85% of the region's GDP), where growth plummeted to 2.7%, 1.6 percentage points lower than forecast in June, 2022. China had to face repeated Covid-19 outbreaks and restrictions on travel, unprecedented drought and prolonged stress in the real estate sector, all of which curb consumption, food and energy production as well as private investment.
"Financial and monetary policy support for domestic demand and easing restrictions on the real estate sector only partially offset these difficulties," the report said.
In the region excluding China, the growth rate also more than doubled, to 5.6% in 2022. Economic activities supported by pent-up demand have been released as many countries continue to lift pandemic-related travel restrictions and travel bans.
Growth in the region excluding China in 2022 was 0.8 percentage points higher than the June 2022 forecast, reflecting the positive growth rates of Malaysia, the Philippines, Thailand and Vietnam, most of which have benefited from a strong recovery in commodity exports.
Growth in Fiji was much stronger than expected, mainly due to the resumption of international travel after travel restrictions were significantly eased. The recovery of tourism in many smaller Pacific island economies has generally been slower than in other countries around the world as COVID-19 outbreaks recur and border restrictions remain.
"Consumer price inflation increased across the region in 2022. Despite this increase, price pressures in East Asia and the Pacific were generally lower than in other regions. This somewhat reflects a negative output gap due to a combination of two factors: relatively high growth potential and a prolonged recovery process, as well as widespread price controls and subsidies," the World Bank experts emphasized.
Growth in the East Asia and Pacific region is projected to stabilize at 4.3% in 2023 as the easing of pandemic-related restrictions allows business activities in China to gradually recover. These forecasts are lower than last June, when growth in the region was expected to surpass 5% in 2023-2024.
The adjustments were broad-based and reflect disruptions related to the Covid-19 pandemic as well as prolonged weakness in China's property sector and weaker-than-expected growth in commodity exports across the region. Inflation is also expected to ease somewhat after peaking in 2022.
In Indonesia, GDP is projected to grow by an average of 4.9% between 2023 and 2024, slightly lower than in 2022, reflecting falling yet strong private spending.
After a strong recovery in 2022, growth in Malaysia, the Philippines and Vietnam is expected to moderate as export growth to key markets slows. Growth is forecast at 4% in Malaysia, 5.4% in the Philippines and 6.3% in Vietnam. The GDP growth rate of Vietnam in 2023 that the WB forecasts is similar to the target set by the National Assembly.
In contrast, Thailand's growth rate is projected to reach 3.6% in 2023, as sectors such as tourism and transport have a slow recovery. Output growth in tourism-dependent Pacific island nations is also expected to accelerate further thanks to easing border restrictions and increasing international tourist arrivals (Palau, Samoa).
However, the World Bank also noted that risks to the region may include the possibility of new disruptions related to the pandemic, continued difficulties in the real estate sector in China, more tightened global financial conditions, slow global growth, and weather events related to climate change occuring more frequently.
Another risk mentioned is that the protracted war in Ukraine and growing geopolitical uncertainties could further undermine business and consumer confidence globally, and lead to a decline in the region's exports.
"Commodity and export-dependent economies such as Cambodia, Malaysia, Mongolia and Vietnam are particularly vulnerable to reduced export demand, including from China. East Asia and the Pacific region continue to suffer from weather phenomena related to climate change with serious consequences and increasing frequency," the WB experts noted.
Compiled by VietnamCredit