by AUFA MARDHIAH
THE World Bank is projecting a 5% economic growth for the East Asia and Pacific region this year, according to its semi-annual economic outlook released yesterday.
However, the bank anticipates a moderation in growth during the latter part of 2023 and forecasts a rate of 4.5% for 2024.
The World Bank’s East Asia and Pacific October 2023 Economic Update highlighted that this year’s regional growth surpasses the average growth rate projected for all other emerging market and developing economies, although it falls short of earlier projections.
China’s economic growth in 2023 is forecasted at 5.1%, with the rest of the region expected to grow at a rate of 4.6% while Pacific Island Countries are set to experience robust growth at 5.2% in the same period.
In 2024, while external conditions are expected to improve, China’s domestic challenges such as the fading rebound from the reopening of its economy, high debt levels, property sector weaknesses and structural factors like an ageing population, are expected to weigh on growth, leading to a projected rate of 4.4%.
Meanwhile, the rest of the region is anticipated to see a slight increase in growth to 4.7% in 2024.
This uptick will be driven by global economic recovery and improved financial conditions, helping to offset the impact of China’s slowing growth and trade policy measures in other countries.
The report also highlighted potential downside risks to the region’s economic outlook, including geopolitical tensions and the possibility of natural disasters and extreme weather events.
World Bank VP for East Asia and Pacific Manuela V Ferro said sustaining high growth will necessitate reforms to bolster industrial competitiveness, diversify trading partners and harness the productivity-enhancing potential of the services sector.
“The East Asia and Pacific region remain one of the fastest growing and most dynamic regions in the world, even as growth moderates,” she said in a statement today.
The report underscores the growing importance of the services sector in a region traditionally known for manufacturing-led growth.
Services have increasingly contributed to labour productivity growth over the past decade, with services exports outpacing goods exports.
Foreign direct investment in services has also exceeded that in manufacturing by a factor of five in countries including China, Indonesia, Malaysia, the Philippines and Thailand.
The adoption of digital technologies and services reforms are playing a pivotal role in enhancing economic performance.
For instance, in the Philippines, the adoption of software and data analytics by firms increased productivity by an average of 1.5% from 2010 to 2019.
In Vietnam, the reduction of policy barriers in areas such as foreign entry and ownership in transport, finance and business services led to a 2.9% annualised increase in value-added per worker in these sectors from 2008 to 2016.
Furthermore, the elimination of such barriers boosted labour productivity by 3.1% in manufacturing enterprises that utilised these services, particularly benefitting small and medium-sized enterprises.
The combination of services reform and digitalisation is creating new opportunities and enhancing people’s capacity to take advantage of them.
Distance education and telemedicine, supported by trained local staff, have improved learning and health outcomes in the region, although disparities in access remain.
World Bank’s East Asia and Pacific region chief economist Aaditya Mattoo said services reform and digitalisation can generate a virtuous cycle of increasing economic opportunity and enhanced human capacity, powering development in the region.
The World Bank’s report underscores the importance of economic reforms and the adoption of digital technologies in sustaining growth and fostering development in the East Asia and Pacific region.