Asia’s economy faces shock from war, slowdown in China and higher rates

The Development Bank cut its 2022 growth forecast for East Asia and the Pacific (EAP) to 5% from 5.4% and warned that growth could fall to 4% if conditions worsen further, trapping another 6 million people in poverty.

“While the East Asia region has weathered the recurring storms of Covid-19, three clouds are gathering over the economic horizon, which will mean lower economic growth and higher levels of poverty,” the World Bank said in a statement. its latest update to the region.

The World Bank said higher US rates are likely to trigger capital outflows from developing countries and put pressure on their currencies, causing “premature” fiscal tightening and hurting growth.

Meanwhile, the resurgence of Covid in China, its zero-tolerance approach to controlling the spread of the virus and Problems in the country’s huge real estate sector could dampen regional exports.

“Specific shocks to economic activity in China are also likely to affect the EaP countries, whose trade is increasingly oriented towards Chinese markets,” the bank said in a statement. said.

China is seeing the strongest spike in Covid-19 cases since the initial outbreak in Wuhan in 2020, and this has led to strict restrictions in major cities. Authorities in Shanghai, home to the country’s financial center and the world’s largest container port, imposed a phased quarantine on 25 million residents last week. The curbs have led to the closure of shops and restaurants, the closure of factories and the overflowing of ports with ships.

The organization added that the turmoil caused by the war in Ukraine could affect the region “most specifically” due to interruptions in the supply of goods and increased financial stress.

“War and sanctions are likely to drive up global food and fuel prices, hurting consumers and growth,” the report said, adding that the number of poor people in the Philippines, for example, could increase by 1.1 million. if cereal prices rise by 10% over the previous year. year.

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