The World Bank has revised down its growth forecast for developing East Asia and the Pacific due to a sluggish China and weakened global demand. In its October report, the World Bank now expects the region to grow by 5% in 2023, slightly lower than its previous forecast of 5.1%. The organization also lowered its growth forecast for 2024 to 4.5%, down from the previous estimate of 4.8%. The World Bank highlighted elevated debt levels in the region, including government, corporate, and household debt, as a risk to economic growth.
The World Bank specifically mentioned China’s longer-term structural factors, such as high debt levels and weakness in its property sector, as reasons for the downward revision. While China’s growth forecast for 2023 remains at 5.1%, the forecast for 2024 has been lowered to 4.4%. The World Bank emphasized that external factors will have a stronger influence on growth in the rest of the region, while domestic factors will dominate in China. Despite the region’s recovery from the shocks of the past few years, including the COVID-19 pandemic, the pace of growth is expected to slow.
The significant increase in government debt and the rapid rise in corporate debt levels, particularly in China, Thailand, and Vietnam, were identified as potential limiting factors for public and private investment. The World Bank warned that high debt levels could lead to higher interest rates, increasing borrowing costs for businesses. The organization also highlighted relatively high levels of household debt in China, Malaysia, and Thailand, which could negatively impact consumption as more income is used for debt servicing. Overall, the World Bank’s report suggests that while the East Asia and Pacific region continues to grow, there are risks associated with debt levels that could hinder future economic expansion.