Growth in the developing East Asia and Pacific region slowed in the first half of 2019 given weakening global demand and heightened policy uncertainty amid ongoing trade tensions. Steady consumption growth helped to partly offset the effects of weakening exports and investment on growth. The region’s growth prospects face intensified downside risks, including further escalation of trade disputes, a sharper-than-expected slowdown in China, the United States and the Euro Area, along with a disorderly Brexit, and an abrupt change in global financing conditions. In some countries, rising indebtedness and other vulnerabilities, such as the constrained capacity for foreign debt rollover, could amplify the negative effects of external shocks. The regional growth moderation underscores the need to address key vulnerabilities and preserve economic dynamism among developing East Asia and Pacific economies. In the short run, countries with sufficient policy space should use available policy tools to stimulate domestic activities. Better quality spending, together with prudent debt management, is needed to safeguard fiscal sustainability. Deepening regional integration would help offset the negative impact of global protectionism. In the medium to long term, pursuing structural reforms that raise competitiveness, support trade and investment, and encourage innovation is critical to boosting productivity and growth.
The economic outlook for the developing EAP region remains positive, and will benefit from an improved external environment as well as strong domestic demand. The growth of regional GDP excluding China is forecast to accelerate in 2018, while China's GDP growth is expected to decline in 2018 and 2019, although remain higher than most countries in the region. Poverty is projected to continue its long-term decline. Major downside risks include financial sector vulnerabilities, large fiscal imbalances, and the possible escalation of geopolitical tensions. The improved outlook for global growth provides a window of opportunity for developing EAP to continue to reduce key vulnerabilities and strengthen the foundations for sustained and inclusive growth in the medium term. The region could also benefit from further developing tourism sectors and deepening of regional integration, to offset the emerging global protectionism. And policies to ensure inclusive growth should involve ensuring economic mobility and security for all, going beyond the primary focus on reducing poverty.
The economic outlook for the developing EAP region remains positive, and will benefit from an improved external environment as well as strong domestic demand. The growth of regional GDP excluding China is forecast to accelerate in 2018, while China's GDP growth is expected to decline in 2018 and 2019, although remain higher than most countries in the region. Poverty is projected to continue its long-term decline. Major downside risks include financial sector vulnerabilities, large fiscal imbalances, and the possible escalation of geopolitical tensions. The improved outlook for global growth provides a window of opportunity for developing EAP to continue to reduce key vulnerabilities and strengthen the foundations for sustained and inclusive growth in the medium term. The region could also benefit from further developing tourism sectors and deepening of regional integration, to offset the emerging global protectionism. And policies to ensure inclusive growth should involve ensuring economic mobility and security for all, going beyond the primary focus on reducing poverty.
"Despite some financial turbulence, growth in developing East Asia and Pacific (EAP) was resilient during the first half of 2018. The growth outlook for the region remains positive. After peaking in 2017, growth in developing EAP is expected to slow modestly in 2018, as China's economic expansion continues to moderate. However, downside risks have significantly intensified. An escalation in trade tensions and heightened financial market turbulence, either due to an acceleration in U.S. monetary policy normalization or contagion from other emerging markets could threaten the region's growth prospects. To navigate uncertainty, developing EAP economies should reduce short-term vulnerabilities and enhance buffers, redouble their commitment to an open, rules-based international trade and investment framework, including through deeper regional economic integration, and deepen structural reforms. The intensification of risks underscores the need to continue to enhance economic security by investing in human capital and strengthen social assistance and insurance programs to increase households' resilience to systemic shocks."
Despite global economic volatility, growth in developing East Asia and Pacific (EAP) was resilient during 2018, and in the first quarter of 2019. The growth outlook for developing EAP is expected to soften in 2019, as China's economic expansion continues to moderate. Downside risks remain, including expected moderated global demand, continued trade tensions, the risk of a faster-thanexpected financial tightening in developed economies, the risk of weaker-than-expected growth in China, and continued financial market volatility. Also, or in combination, these risks could weigh on the· region's growth prospects in the short-to-medium term. To manage global and regional headwinds, developing EAP economies should reduce short-term vulnerabilities and enhance buffers, redouble their commitment to an open, rules-based international trade and investment framework, including through deeper regional economic integration, and deepen structural reforms. The intensification of risks underscores the need to continue to enhance economic security by investing in human capital and strengthen social assistance.
East Asia and the Pacific does not so far conform to the current narrative of stagflation. The region, with some exceptions, is growing faster and has lower inflation than other regions. And prospects for several countries have improved, as they bounced back from the distress of the Delta wave in a still buoyant global economy. But this rosy picture must not obscure four impediments to inclusive and sustainable growth: disease, deceleration, debt, and distortions. In particular, current policies to contain inflation and debt are distorting the markets for food, fuel and finance in ways that could compromise development goals. In each case, more efficient measures could address current difficulties without undermining longer term objectives.
Growth in the developing East Asia and Pacific region slowed sharply in 2020Q1 because of the negative impact of the Covid-19 on economic activity. The decline has been broad-based reflecting the interconnectedness of the EAP economies and reverberations from the global economy as the virus turned into a pandemic. The Covid-19 outbreak followed an extended period of subdued growth in the region amid multiple external headwinds and heightened trade policy uncertainty. China and other regional economies have implemented monetary and fiscal policy measures to mitigate the negative impact of the outbreak. Growth in the East Asia and Pacific (EAP) region is projected to slow from 5.8 percent in 2019 to lower-than-expected [5.2 percent in 2020], reflecting the expected negative effects of the COVID-19. In this baseline scenario, which is subject to significant uncertainty, growth in the region is expected to recover to [5.6 percent in 2021], as the impact of Covid-19 gradually dissipates. In the medium-term regional growth is expected to continue its downward trend reflecting multiple structural headwinds. Policymakers should focus on designing economically efficient transmission control policies that consider both the marginal costs and the marginal benefits of preventive measures. Such policies would ideally be based on countries’ preparedness and exposure as well as economic circumstances. Targeted fiscal and monetary polices can help reduce the economic disruption caused by COVID-19 in the short term. In the medium-term, there is need to restore depleted buffers, address sources of financial instability, and invest in preventing and coping with infectious disease. Given the growing interdependence between EAP countries, coordinated policies and investments could increase resilience to shocks.
"Long COVID: Scars and Opportunity." The title of this report has two meanings. First, that the disease will leave in its wake a durably damaged economy. Second, that the disease is not leaving any time soon and may be here to stay. This duality reflects the two themes of this Update. In the near time, the persistence of the pandemic will prolong human and economic distress unless individuals and firms can adapt. In the longer-term, COVID-19 will reduce growth and increase inequality unless we can remedy the scars and grasp the opportunities created by the pandemic. Accordingly, policy action must help economic agents not just to adjust today but also to make choices that avert economic sluggishness and disparity tomorrow. We begin by addressing three proximate questions: What is happening to the economies? Why? And what can we expect? We then discuss the longer-term impact of COVID-19, on growth through the impact on firms and on inequality through the impact on households.
Conditions in the region and the rest of the world have changed dramatically since the April 2020 Regional Economic Update (World Bank 2020a). In addition to still unfolding unprecedented health crisis, the world is now experiencing the deepest global recession since the Second World War (World Bank 2020b). The global economy is projected to contract by 5.2 percent this year, with output in emerging market and developing economies (EMDEs) shrinking by 2.5 percent—the first contraction in at least sixty years. The COVID-19 pandemic has resulted in a significant loss of life and has had severe economic effects on the developing East Asia and Pacific (EAP) region. Many governments have responded to the pandemic-induced shock with sizable fiscal and monetary support. Although subject to significant uncertainty, regional growth is expected to rebound to [6.6 percent] in 2021 as the pandemic subsides, remaining restrictions are lifted, and global demand recovers. The pandemicinduced crisis will likely hit hardest the poorest and most vulnerable countries and communities, [putting the Sustainable Development Goals (SDGs) further out of reach]. The dynamics of the shock mean that in 2020 the region will experience the widest output gaps in decades. Absent of sift and effective actions, the pandemic will slow potential growth in the region by weakening investment, human capital, and the supply chains that have been an important conduit for productivity gains over the past decade.
"Developing EAP grew slightly faster than anticipated in 2017. The growth ofregional GDP excluding China is forecast to accelerate in 2018, while China's GDP growth is expected to moderate as the economy keeps rebalancing. Major downside risks include volatility associated with faster than expected' monetary policy tightening in advanced economies and rising threat of trade restrictions. Developing EAP countries would need to get ready to respond to increasing interest rates and find ways to raise potential growth in the medium run. Specifically, amid the rising risk of protectionism and changes in the global manufacturing landscape, countries should continue to enhance trade facilitation and integration, increase the effectiveness of schools and education systems and upgrade capabilities to ensure that workers and managers have necessary skills. To provide economic security to the population, policies should focus on strengthening social assistance and insurance programs and increasing resilience to systemic shocks."
The East Asia and Pacific Economic Update provides regular, biannual analyses of development trends and economic policy issues across the East Asia and Pacific region.
There is no bigger policy agenda in the East Asian region than connectivity. Costs of international connectivity are indeed falling, in the movement of goods, services, people and data, leading to greater flows, and to the reorganisation of business and the emergence of new forms of international transactions. There are second-round effects on productivity and growth, and on equity and inclusiveness. Participating in trade across borders involves significant set-up costs and, if these costs are lowered due to falling full costs of connectivity, more firms will participate, which is a driver of productivity growth and innovation at the firm level. Connectivity investments are linked to poverty reduction, since they reduce the costs of participating in markets. This volume includes chapters on the consequences of changes in both physical and digital connectivity for trade, for the location of economic activity, for forms of doing business, the growth of e-commerce in particular, and for the delivery of new services, especially in the financial sector. A study of China’s Belt and Road Initiative (BRI) is also included. These studies are preceded by an assessment of the connectivity performance in the Asia-Pacific region and followed by a discussion of impediments to investment in projects that contribute to productivity. The collection as a whole provides the basis for a series of recommendations for regional cooperation. The Pacific Trade and Development (PAFTAD) conference series has been at the forefront of analysing challenges facing the economies of East Asia and the Pacific since its first meeting in Tokyo in January 1968.
