World Bank forecasts further slowdown in China’s growth despite stimulus; East Asia & Pacific to bear brunt

The World Bank has predicted that China’s economic growth will slow further in 2025 despite recent stimulus efforts. This could put additional pressure on regional economies in East Asia and the Pacific, according to a report by Bloomberg.

In its latest economic outlook, the World Bank forecast China’s growth to drop to 4.3 per cent in 2025, down from an expected 4.8 per cent in 2024. As a result, growth across East Asia and the Pacific, including countries like Indonesia, Australia, and South Korea, is also expected to slow, falling to 4.4 per cent in 2025 from about 4.8 per cent in 2023, the report added.

"For three decades, China’s growth has spilled over beneficially to its neighbours, but the size of that impetus is now diminishing," the World Bank stated on Tuesday. “Recently signalled fiscal support may lift short-term growth, but longer-term growth will depend on deeper structural reforms,” it said, as quoted by Bloomberg.

Chinese authorities had set a growth target of around 5 per cent for 2023, but this has become less likely due to weak consumer spending and a struggling property market. In late September, Beijing introduced a wave of stimulus measures, including interest rate cuts aimed at boosting the economy, as per the report by Bloomberg.

Industrial robots, AI hurt labour market

Hopes are now rising for more fiscal measures to stimulate spending, rebuild confidence, and reinvigorate the economy. The World Bank’s 2023 growth forecast aligns with estimates from a Bloomberg survey, but its 2025 prediction is slightly below the median forecast of 4.5 per cent, as per the report.

In addition to China’s slowing growth, the World Bank noted that shifting trade and investment patterns, as well as global policy uncertainties, may affect the East Asia and Pacific region. Although trade tensions between the US and China have provided opportunities for nations like Vietnam, new restrictions on imports and exports are limiting some economies' roles as connectors in global trade, the report added.

It also highlighted how new technologies like industrial robots and artificial intelligence (AI) are impacting labour markets in the region. While fewer jobs in Asia are threatened by AI due to the prevalence of manual tasks, the region is less likely to benefit from the productivity gains AI offers, the World Bank warned, as per the report.

(With inputs from Bloomberg)