World Bank lifts China view, slashes Asia outlook
Pandemic may do lasting damage in Asia Pacific, says lender
The World Bank lifted its China growth forecast, while slashing its outlook for the rest of the East Asia and Pacific region as the spreading delta variant hammers manufacturing and tourism, and low vaccination rates hamper the recovery.
The lender now expects China to grow 8.5 per cent this year compared to the 8.1 per cent it forecast in April, though it cautioned the recovery is losing momentum. It slashed its outlook for East Asia and Pacific, excluding China, to 2.5 per cent from the 4.4 per cent previously expected. Overall regional growth is seen at 7.5 per cent, lifted by China.
Higher unemployment and inequality in the East Asia and Pacific region are emerging as key legacies of the crisis, the World Bank said.
“Covid-19 threatens to create a combination of slow growth and increasing inequality for the first time this century in the EAP,” the lender warned. “The result could be deprivation to an extent that the region has not seen in the last two decades.”
After weathering earlier pandemic waves better than other regions, the fast-spreading delta variant has thrown into turmoil factories and ports in countries that were once among the most successful at containing the virus. That’s compounding supply-chain blockages of manufactured goods.
Border and travel restrictions in the region continue to upend tourism and delay a full recovery, even as other parts of the world reopen.
In its report, the World
Bank warned the pandemic will do lasting damage to economies by curbing public and private investment and through the loss of human and intangible capital. There is a risk of long-term economic scarring if the disease persists, the lender said.
“Policy actions must help economic agents not just to adjust today but also to make choices that avert deceleration and disparity tomorrow,” the lender said in its report.
The economies of several Pacific island countries and Myanmar have been hit the hardest, with Myanmar expected to contract by 18 per cent while the Pacific island countries as a group are anticipated to shrink 2.9 per cent, the World Bank said.
Myanmar will see the biggest contraction in employment in the region and the number of poor people in the country will rise, it added.
“There is no doubt the military takeover (in Myanmar) has led to a disruption of economic activity combined with the civil disobedience movement which means fewer people are going to work," said World Bank East Asia and Pacific Chief Economist Aaditya Mattoo.
The World Bank slashed its outlook for East Asia and Pacific, excluding China, to 2.5 per cent from the
4.4 per cent previously expected