The World Bank lowered its 2022 growth prediction for East Asia and the Pacific to reflect the economic impact of Russia’s invasion of Ukraine, warning that if the situation worsens, the area could lose even more momentum.
In a research released on Tuesday, the Washington-based lender predicted that growth in the expanding East Asia and Pacific (EAP) area, which includes China, will be 5.0 percent in 2022, down from 5.4 percent in October.
However, if conditions worsen and government policy responses are weaker, GDP might slip to 4%, according to the World Bank.
China’s economy is predicted to grow 5.0 percent this year, down from a previous forecast of 5.4 per cent, according to the report, which emphasised the government’s ability to provide stimulus to counteract unfavourable shocks.
“The region confronts a triad of shocks which threaten to undermine its growth momentum,” said World Bank East Asia and Pacific Chief Economist Aaditya Mattoo.
The conflict between Russia and Ukraine, which Mattoo described as the “most significant risk” to the region’s growth prospects, is causing food and fuel price hikes, financial volatility, and a loss of confidence around the world.
According to Mattoo, Russia’s invasion of Ukraine is particularly concerning because the region is still dealing with the consequences of the COVID-19 outbreak, a structural slowdown in China, and higher inflation, which could trigger faster monetary tightening in the United States.
According to Mattoo, the war’s impact on East Asian and Pacific economies will vary based on their exposure and resilience. The rest of the area, excluding China, is expected to grow at a rate of 4.8 per cent this year.
“Just as the economies of East Asia and the Pacific were recovering from the pandemic-induced shock, the war in Ukraine is weighing on growth momentum,” World Bank Vice President for East Asia and Pacific Manuela Ferro said in a statement.
“The region’s largely strong fundamentals and sound policies should help it weather these storms.”
(Adapted from AlJazeera.com)