According to the World Bank’s “Global Economic Prospects” report, China’s gross domestic product (GDP) is expected to rise by 4.3% in 2023, which is 0.9 percentage point less than earlier projections. The downward revisions are due to COVID-related disruptions and China’s real estate market’s persistent deterioration. The GDP of Vietnam is predicted to increase by 6.3% in 2023, while the GDP of Cambodia is predicted to increase by 5.2%.
The East Asia and Pacific (EAP) region’s growth is anticipated to increase by 4.3% in 2023 as China’s economy begins to gradually recover as pandemic-related restrictions are eased. These predictions are lower than those made in June of last year, when it was anticipated that regional growth would exceed 5% in 2023–24. One of the regions for downward adjustments is the region’s weaker-than-expected growth in goods exports. According to the research, inflation is also anticipated to moderate somewhat after reaching a peak in 2022.
Growth is anticipated to decline in the region outside of China to 4.7% in 2023 as pent-up demand wanes and declining goods export growth overcomes a tardy tourist and travel recovery. While many countries are still struggling to recover from the pandemic, output in 2023 is predicted to remain significantly below pre-pandemic trends. High prices for energy and other inputs as well as further tightening of monetary policy are anticipated to restrain activity this year, particularly investment. The average annual increase in per capita income in EAP for the ten years prior to the pandemic was 6.2%; however, projections for 2020–23 indicate a slowdown to 3.6%.
In Indonesia, GDP growth is anticipated to average 4.9% in 2023–2024, only marginally weaker than in 2022 due to softening but still healthy private expenditure. Following a robust recovery in 2022, it is anticipated that growth in Malaysia, the Philippines, and Vietnam would decelerate as export growth to important markets slows. Malaysia’s growth is expected to be 4%, while the Philippines’ growth is expected to be 5.4%. Thailand’s growth, however, is anticipated to pick up speed and reach 3.6% in 2023. The easing of border barriers is also anticipated to enhance the economic growth of Pacific Island nations.
The prospect of new pandemic-related disruptions, continued real estate sector stress in China, tighter global financial conditions, weaker global GDP, and more frequent disruptive weather events linked to climate change are some of the downside risks to the forecast for the EAP region. A protracted conflict in Ukraine and growing geopolitical unrest might further undermine consumer and corporate confidence globally and cause the region’s export growth to slow down more drastically than anticipated.
The economies that depend heavily on commodities and exports, such as those in Cambodia, Malaysia, Mongolia, and Vietnam, are particularly susceptible to a slowdown in export demand, including from China. The frequency of extremely disruptive weather occurrences in the area is continuing to rise due to climate change.
In terms of current developments, growth in the EAP region slowed significantly in 2022 to an expected 3.2%, 1.2 percentage points below earlier projections, following a strong recovery in 2021. China, which makes up around 85% of the region’s GDP, was mostly to blame for the downturn. Growth there abruptly plummeted to 2.7%, which was 1.6 percentage points less than anticipated in June. As a result of persistent COVID-19 outbreaks, travel restrictions, unheard-of droughts, and protracted property sector stress, the country’s consumption, energy output, and residential investment have all been constrained. These challenges have only been partially overcome by monetary and fiscal policies that encourage domestic demand and loosen limitations on the real estate industry.
The rate of growth in the region outside of China more than doubled, increasing to 5.6% in 2022. As more nations lifted travel and mobility restrictions connected to the epidemic, activity was aided by the release of pent-up demand. Compared to the June prediction, growth in the region outside of China was 0.8 percentage points higher in 2022, thanks to improvements in Malaysia, the Philippines, Thailand, and Vietnam, the majority of which also benefited from a robust recovery in exports of manufactured products.
Inflationary pressures on consumer prices rose in the EAP region in 2022. Despite this rise, price pressures in EAP have traditionally been lower than in other regions. This is partially reflected in the fact that there are still negative production gaps as a result of widespread price restrictions and subsidies, comparatively high potential growth, a long recovery, and high potential growth.