East Asia and Pacific Region Continues to Outpace Global Growth, But Slows Compared to Pre-Pandemic Levels, Says World Bank

Pacific Island countries, including nations heavily reliant on tourism, are projected to grow by 3.5% in 2024 and 3.4% in 2025, as the tourism sector continues to recover.

The East Asia and Pacific (EAP) region remains a key driver of global economic growth, but its pace has slowed compared to pre-pandemic years, according to the World Bank's semi-annual East Asia and Pacific Economic Update. The report projects the region's growth at 4.8% in 2024, slowing further to 4.4% in 2025. Despite leading global growth, the region's post-pandemic recovery is tempered by external and domestic challenges.

China, the region’s largest economy, is expected to see its growth decline from 4.8% in 2024 to 4.3% in 2025. This slowdown is attributed to persistent weaknesses in the property market, reduced consumer and investor confidence, an aging population, and ongoing global tensions. These factors have weighed heavily on China's economy, which for decades had been a key growth engine for the region through strong import demand and investment flows.

Other countries in the region, however, are expected to perform relatively well. Growth in the rest of East Asia and the Pacific is forecast to rise from 4.7% in 2024 to 4.9% in 2025, driven by increasing domestic consumption, recovering exports, and a rebound in tourism. Among the larger economies, Indonesia stands out, with growth expected to surpass pre-pandemic levels, while Malaysia, the Philippines, Thailand, and Vietnam are forecast to grow at rates below their pre-pandemic performance.

Pacific Island countries, including nations heavily reliant on tourism, are projected to grow by 3.5% in 2024 and 3.4% in 2025, as the tourism sector continues to recover. However, investment growth across the region remains subdued, reflecting broader global uncertainties.

Key Challenges: Trade Shifts, China’s Slowdown, and Global UncertaintyThe World Bank report highlights three major factors affecting the region's growth prospects:

Shifting Trade Dynamics: Trade tensions between the US and China have provided opportunities for countries like Vietnam, whose firms exporting to the US saw sales grow 25% faster between 2018 and 2021. However, new trade barriers, such as stricter rules-of-origin and export restrictions, may limit the ability of countries to act as global trade connectors.

China’s Slower Growth: For decades, China’s rapid growth fueled economic expansion in neighboring countries by increasing import demand. But as China’s import growth slows – rising only 2.8% in the first seven months of 2023, compared to an average of 6% per year in the previous decade – its ability to pull along other regional economies has diminished.

Global Economic and Policy Uncertainty: Heightened geopolitical tensions and economic policy uncertainty, such as changes in interest rates and trade policies, could reduce industrial output and stock prices in the region by up to 0.5% and 1%, respectively.

Adapting to Technological Shifts and Job Creation

A special focus of the report addresses the impact of new technologies, such as industrial robots, AI, and digital platforms, on job markets in the EAP region. Between 2018 and 2022, the adoption of robots in ASEAN-5 countries (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) created jobs for an estimated 2 million skilled workers due to productivity gains and the need for complementary skills. However, it also displaced 1.4 million low-skilled workers engaged in manual, routine-based jobs.

The World Bank notes that while the region has a lower proportion of jobs threatened by AI than advanced economies, it is also less equipped to benefit from AI-driven productivity improvements. Only 10% of jobs in the region involve tasks that complement AI, compared to 30% in more developed economies.

Path Forward: Trade and Skills Development

To sustain strong growth in the face of shifting trade patterns and technological advancements, the World Bank recommends that EAP countries deepen trade agreements and focus on equipping their populations with the skills needed to leverage new technologies.

“East Asia’s traditional development model – relying on open global markets and labor-intensive production – is being challenged by trade tensions and technological disruption,” said Aaditya Mattoo, Chief Economist for the East Asia and Pacific Region at the World Bank. “The region must adapt by strengthening trade relationships and investing in skills development to ensure long-term economic resilience.”

Despite the challenges, the EAP region remains a vital growth engine for the global economy, with significant opportunities for countries that can navigate evolving global dynamics.