The World Bank said the region’s “most pressing challenge” is the growing divide between the US and China.
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The World Bank expects the economies of East Asia and the Pacific to grow greater than previously estimated because of a pointy recovery in activity in China, noting that the region has not been affected by global banking tensions.
The region is projected to grow by 5.1% in 2023, up from 4.6% projected last October, the World Bank said in its April report. The East Asia Pacific region saw growth of three.5% in 2022.
As for the Chinese economy, the World Bank raised its full-year growth forecast for 2023 from 4.5% to five.1%.
“The forecast assumes a growth-friendly adjustment in China’s health, regulatory and macroeconomic policies,” it said, adding that the rebound in domestic consumption is expected to place “moderate upward pressure” on inflation, which is expected to rise to 2.6% in 2023 from 2% in 2022
![The World Bank says China's recovery is not](https://image.cnbcfm.com/api/v1/image/107218241-16802358881680235882-28811108200-1080pnbcnews.jpg?v=1680238846&w=750&h=422&vtcrop=y)
Addressing concerns about banking turmoil within the US and Europe, the World Bank said that the East Asia Pacific banking sector “has not been affected to date, but there are potential risks from direct or indirect exposure to losses.”
“Publicly available ratios show adequate overall capital and low NPLs for most countries within the region,” the World Bank said. “Financial sector performance is good to date within the East Asia Pacific region.”
Separation concerns
The World Bank said the region’s “most pressing challenge” is the growing divide between the US and China.
“Politics, not economic fundamentals and predictable rules, shape trade patterns, and the resulting uncertainty may discourage investment in other countries,” the World Bank wrote in its report.
Aaditya Mattoo, the World Bank’s chief economist for the East Asia-Pacific region, said the impact of decoupling could extend beyond each countries.
“There is no doubt that these divisions between these two big traders can have an impact on the remainder of the world, whatever the impact they’ve on the countries themselves,” he told CNBC.Road Signs in Asia”.
“With these restrictions, we risk disrupting global value chains,” he said.
The “speed limit” of the worldwide economy
In a separate v report earlier this week, the World Bank said that the “speed limit” of the worldwide economy – which it defines as the utmost long-term growth rate at which it may grow without causing inflation – will hit a three-decade low by 2030.
He expects average global potential gross domestic product growth from 2022 to 2030 to fall to 2.2% per 12 months – a decline that he said is “a couple of third of the pace that dominated the primary decade of this century.” It added that potential GDP could increase by as much as 0.7 percentage points if governments adopt “sustainable, growth-oriented” policies.
“The continued fall in potential growth has major implications for the world’s ability to face the growing range of challenges that characterize our times – persistent poverty, divergent incomes and climate change,” said Indermit Gill, chief economist on the World Bank and senior vp of the World Bank for Development Economics.
“A lost decade could also be upon us for the worldwide economy,” warned Gill.