Vietnam is projected to become the fastest growing economy in Asia this year, amid a regional recession overwhelmingly led by China’s sharp economic slowdown, according to the World Bank.
In its most recent economic outlook report for East Asia and the Pacific, released yesterday, the World Bank forecasts these regions to grow 3.2% in 2022, up from 7.2% in 2021, before accelerating to 4.6% in 2023.
The projected growth rate for this year marked a significant reduction from the 5 percent the World Bank forecast for the year in its latest outlook report in April.
Much of this can be attributed to the economic slowdown in China, which previously led the region’s recovery from the COVID-19 pandemic, before the country’s nearly counterproductive stringent “COVID-zero” policy slowed its economy. In its outlook, the World Bank projected that China’s economy would grow 2.8 percent this year and 4.5 percent in 2023, a “sharp slowdown” from 8.1 percent in 2021. In its latest outlook, released in April, the Bank had predicted China would grow 5 percent in 2022.
When China is excluded from the calculations, forecast growth for East Asia and the Pacific actually rose to 5.3 percent, up from 4.8 percent in the April outlook. This represents more than double the region’s growth rate of 2.6 percent for 2021 and a sign that while the COVID-19 pandemic is not yet over, its economic impacts have been greatly ameliorated.
Perhaps the most important story was the emergence of Vietnam as the fastest growing economy in East or Southeast Asia. Given the country’s combination of relatively effective COVID-19 containment measures, demographic advantages, and a privileged position in the regional and global economic structure, the World Bank estimated that Vietnam’s economy will grow 7.2 percent in 2022. , above its projection of 5.3 percent in April 7.2. It then projects it to grow an additional 6.7 percent in 2023. Of the Southeast Asian nations, only the Philippines (6.5 percent), Malaysia (6.4 percent), and Indonesia (5.1 percent) are forecast to grow. ) will exceed 5 percent this year.
In the rest of the region, the outlook was cautiously positive. The World Bank raised its economic forecast for Malaysia from 5.5 to 6.4 percent and made similar upward revisions for the Philippines (5.7 to 6.5 percent), Thailand (2.9 to 3.1 percent) and Cambodia (4.5 to 4.8 percent).
In a press release issued in advance From the full report, the World Bank attributed this relatively strong growth to three factors: the recovery in private consumption in the first half of 2022, “enabled by an easing of COVID-related restrictions”; sustained global demand for exports of manufactured goods and raw materials from East Asia and the Pacific; and the limited tightening so far of fiscal and monetary policy, although he noted that “pressures to tighten may increase” in the coming months.
But the Bank also noted a number of headwinds facing the region, which has jumped from the COVID-19 frying pan into the fire of an economic slowdown due to rising inflation and the ongoing war in Ukraine. “The global economic slowdown is beginning to decrease the demand for exports of raw materials and manufactured products from the region,” the report states.
He also pointed to the impact of inflation and interest rate increases initiated by central banks in the developed world, particularly the US Federal Reserve, to control it. This tighter monetary policy, in turn, has “led to capital outflows and currency depreciations in some East Asian and Pacific countries. These developments have increased debt service burdens and reduced fiscal space, hurting countries that entered the pandemic with high debt burdens.”
The Southeast Asian example of this is Laos, which is currently in the midst of a severe debt crisis after years of heavy borrowing from China, and saw its projected 2022 growth slash from 3.8 percent to 2. 5 percent.
Another outlier is conflict-torn Myanmar, which the World Bank projected would “enjoy” a 3 percent recovery in 2022, down from 1 percent it estimated in April. But after a barely credible 18 percent contraction in 2021, this is far from an indication of positive economic development. In fact, such is the uncertainty of the political and economic situation in Myanmar that the Bank refused to provide a projection of its economy in 2023.