World Bank cuts growth outlook for East Asia in 2022, cites slowing China

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A participant stands near a World Bank logo at the International Monetary Fund – World Bank Annual Meeting 2018 in Nusa Dua, Bali, Indonesia, October 12, 2018. REUTERS/Johannes P. Christo/

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MANILA, Sept 27 (Reuters) – Economic growth in East Asia and the Pacific will weaken sharply in 2022 due to China’s slowdown, but the pace of expansion will pick up next year, said the World Bank announced on Tuesday.

The Washington-based lender said in a report that it expects growth in 2022 in the East Asia and Pacific region, which includes China, to slow to 3.2%, down from its forecast of 5.0% in April, and growth of 7.2% a year earlier.

The weaker forecast was mainly due to a sharp slowdown in China, caused by its strict zero-COVID rules which disrupted industrial production, domestic sales and exports, the World Bank said.

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China, which accounts for 86% of the region’s 23-country economic output, is expected to grow 2.8% this year, a significant deceleration from the bank’s previous forecast of 5.0%. In 2021, the Chinese economy grew by 8.1%, its best growth in a decade.

For 2023, the world’s second largest economy has recorded growth of 4.5%.

“As they prepare for slowing global growth, countries should address the domestic policy distortions that hamper longer-term development,” said Manuela Ferro, World Bank Vice President for Development. East Asia and the Pacific, in a statement.

Another risk to the region’s outlook was the aggressive interest rate hikes that central banks around the world are undertaking to combat soaring inflation. These caused capital outflows and currency depreciations, the World Bank said.

The multilateral aid agency has warned policymakers against imposing price controls through subsidies, warning that such measures would only benefit the wealthy and divert public spending from infrastructure, health and education.

“Controls and subsidies blur price signals and hurt productivity,” Aaditya Mattoo, World Bank economist for East Asia and the Pacific, said in a statement.

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Reporting by Karen Lema; Editing by Kanupriya Kapoor

Our standards: The Thomson Reuters Trust Principles.

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