Growth in East Asia and the Pacific

The World Bank predicts that growth in developing East Asia and the Pacific will accelerate this year due to China's economy reopening. However, major economies must navigate a changing global landscape including rising trade tensions, rapidly aging populations, and climate risks.

Drivers of Growth

• The Big Driver for growth in East Asia and the Pacific is China which is projected to grow at 5.1 percent this year largely on the strength of strong domestic consumption bounce back from the COVID difficulties of 2022.

• The rest of the region is projected to slow down slightly from a growth of 5.8 to 4.9 percent.

Challenges

• There are three big challenges that the whole region is going to face:

• A retreat from globalization

• Trade divisions

• Uncertain political factors creating broader uncertainty which could seriously hurt growth in the region unless there is a deep reassessment of the reform path.

• Rapid aging and climate change are also casting a shadow over growth prospects for this region.

Solutions

• Domestic reform should be prioritized as it can help adapt to changes without being antithetical to your own growth.

• Reforming trade policies, investment policies, and services can lead to productivity growth which matters for its own sake but also because better more productive services are good for the economy.

The Importance of Social Protection and Inclusive Growth

Aditya Matu, Chief Economist East Asia and Pacific region at the World Bank, emphasizes the need for social protection to play a bigger role in laying the foundations for inclusive growth. He highlights the importance of investing in infrastructure such as roads, ports, fiber optic cables, education and health to remedy deficiencies in human capital. Additionally, he stresses that smaller countries in the region must prioritize adapting to climate change.

• Social protection needs to play a bigger role in laying foundations for inclusive growth.

• Investing in infrastructure is crucial (roads, ports, fiber optic cables).

• Deficiencies in human capital (education and health) need remedying.

• Smaller countries must prioritize adapting to climate change.

Transition from Manufacturing to Services

Aditya Matu discusses how economies have not adequately braced themselves for the transition from manufacturing to services. He notes that there is a persistent suspicion of openness towards services which leads to a persistence of protection through discretionary restrictions on investment and data flows. This is problematic because technological changes are transforming service sectors such as retail, transport and finance. To harness these changes for collective benefit, reforms are needed.

• Economies have not adequately prepared for transition from manufacturing to services.

• Persistent suspicion of openness towards services leads to protectionism through discretionary restrictions on investment and data flows.

• Technological changes are transforming service sectors such as retail, transport and finance.

• Reforms are needed to harness technological changes for collective benefit.