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World Bank cuts 2022 growth forecast for East Asia and Pacific

World Bank cuts 2022 growth forecast for East Asia and Pacific

World Bank, the international financial institution, has reportedly slashed the 2022 economic growth forecast for the East Asia and Pacific region, stating that it will see a sharp decline this year due to a slowdown in China. However, the bank also added that the pace of expansion will pick up in 2023.

According to its report, the financial institution expects 2022 growth in the region, which includes China, to go down to 3.2%, from its April forecast of 5%. In comparison, the region’s growth in 2021 was 7.2%.

The World Bank claimed that the slashed forecast was mainly due to a sharp slowdown in China as the country continues implementing its zero-Covid policy, which has led to several disruption in its export, domestic sales, and industrial production.

China, which represents 86% of the 23-nation region’s economic output, is projected to grow 2.8% in 2022, which is a significant slow-down from the 5% that was predicted earlier in April.

The pace implies that for the first time in decades, the rest of the region will grow quicker than China.

Last year, China’s economy grew 8.1%, marking its best growth in the last ten years. But for 2023, the economy is anticipated to grow at 4.5%.

The downgrade in forecasts comes as economists grow more cynical regarding the outlook of the world’s second-largest economy. Last week, the Asian Development Bank also slashed China’s growth outlook for 2023 from 4% to 3.3%.

Other investment banks have also been cutting their outlook for China.

Goldman Sachs cut its outlook from 5.3% to 4.5%, Nomura Holdings cut its outlook from 5.1% to 4.3%, and Societe Generale projected that output expansion will be under 5% in 2023.

For the East Asia and Pacific region, a decline in global export order will impact demand, while increasing global interest rates take away capital as currencies start to weaken.

Aaditya Mattoo, chief economist for East Asia and Pacific, World Bank, stated that the US dollar’s strength is causing a mixed impact by helping export competitiveness while also pressuring borrowers that are repaying foreign currency debt.

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