Debt, trade barriers to drag Asian economies in 2024
Asian economies are not doing as well as they could and growth in the region is forecast to slow to 4.5% this year from 5.1% in 2023, the World Bank said in a report released Monday.
Debt, trade barriers and policy uncertainties are dulling the region’s economic dynamism and governments need to do more to address long-term problems such as weak social safety nets and underinvestment in education, the report says.
Asia’s economies are growing more slowly than before the pandemic, but faster than other parts of the world. And a rebound in global trade— which grew by only 0.2% in 2023 but is projected to grow by 2.3% this year—and easing financial conditions as central banks cut interest rates will help offset weaker growth in China.
“This report demonstrates the region is outperforming much of the rest of the world, but it’s underachieving its own potential,” Aaditya Mattoo, the World Bank’s chief economist for East Asia and the Pacific, said in an online briefing.
“The leading firms in the region are not playing the… role that they should,” he added. A key risk is that the US Federal Reserve and other major central banks might keep interest rates higher than before the pandemic. Another comes from the nearly 3,000 trade-distorting measures, such as higher tariffs or subsidies, that were imposed in 2023, the report said.
Most of those policies were set by major industrial economies such as the US, China and India. The World Bank is forecasting that growth will slow to 4.5%.
“China is aiming to transition to a more balanced growth path but the quest to ignite alternative demand drivers is proving difficult,” the report says.
Mattoo said Beijing still has a way to go in shifting its economy away from reliance on real estate construction to drive business activity, and just spending more money won’t fix the problem.