On Tuesday, the Financial Times reported that the developing economies of East Asia are staring down a period of the slowest growth rates seen in five decades, due to such factors as US protectionism and increasing levels of debt, according to new data from the World Bank.
On Sunday, the World Bank downgraded its GDP growth forecast for 2024 for East Asia and the Pacific from the previously forecast 4.8% to 4.5%.
FT wrote, “The projections show that the region, one of the world’s main growth engines, is set for its slowest pace of growth since the late 1960s, excluding extraordinary events such as the coronavirus pandemic, the Asian financial crisis and the global oil shock in the 1970s.”
The World Bank’s data showed that rising geopolitical tensions, as well as the potential for natural disasters such as extreme weather events, have added additional downside risks to the economic outlook for the region. Other factors weighing on growth prospects include rising household, corporate, and government dent, as well as softer global demand.
Also impacting the region are the new US industrial trade policies being produced by the Inflation Reduction Act and the Chips and Science Act. Designed to lend advantage to US manufacturing and reduce the US dependence on China, the policies are also causing a significant decline in the East Asian region’s exports to the US.
The World Bank noted that since the inception of the new policies generated by the laws, the exports of electronics and machinery from China and southeast Asian nations, such as Vietnam, Indonesia, the Philippines, and Thailand have declined steadily. Meanwhile, the report pointed out that the trade between the US and other countries not targeted by the restrictions, such as Canada and Mexico, had not declined.
Aaditya Mattoo, chief economist for East Asia and the Pacific at the World Bank, said, “This whole region which had perversely benefited from US-China trade tensions in terms of [trade] diversion now is suffering trade diversion away from it.”
