China’s growth is expected to fall down in 2024, as per World Bank. (Representational Photo)
The World Bank has said that east Asia’s developing economies are expected to expand at one of the lowest rates in five decades, blaming the gloomy outlook to slowdown in China. The Financial Times said in a report that the World Bank cut its forecast for China’s growth next year to 4.4 per cent from the 4.8 per cent it expected in April. This is even less than the growth forecast of five per cent released by China’s policy makers.
The World Bank cited a string of weak indicators for the dismal forecast for the world’s second-biggest economy, said the Financial Times (FT) report.
The bank also downgraded its 2024 forecast for gross domestic product growth for developing economies in east Asia and the Pacific to 4.5 per cent from 4.8 per cent in the first quarter of the current financial year, the outlet further said.
This is the slowest rate of growth for one of the high performing regions of the world, except the coronavirus pandemic, the Asian financial crisis and the global oil shock in the 1970s.
“China’s rebound from strict pandemic controls was expected to be more sustained and more significant than it turned out to be,” Aaditya Mattoo, World Bank chief economist for east Asia and the Pacific, told FT.
The reasons attributed are Chinese retail sales tumbling to below pre-pandemic levels, stagnant house prices, increased household debt and lagging private sector investment.
Mr Mattoo said in order to put China on the expected growth track, “deeper” service sector reforms are needed.
“In a region which has really thrived through trade and investment in manufacturing… the next big key to growth will come from reforming the services sectors to harness the digital revolution,” he added.
Compared to second quarter of 2022, goods exports are down more than 20 per cent in Indonesia and Malaysia, and more than 10 per cent in China, said the FT report.
Rising household, corporate and government debt has further dented growth prospects, it added.
Another major reason is the trade tensions between China and the US. For years, Beijing was benefited by the tariffs it imposed on Washington that drove demand for imports towards other countries in the region, especially Vietnam.
But the introduction of the IRA and new chip rules in 2022 turned the tide in the favour of the US. They have hit south-east Asian countries as their exports of affected products to the US have fallen.