Asian Economies Hobbled By Ukraine War, China And The Fed: World Bank
The World Bank (WB) said on Tuesday that countries in Asia may have to deal with three major economic shocks this year — the war in Ukraine, a sharp slowdown in China, and rate hikes from the US Federal Reserve, Laura He reported for CNN Business.
Photo Insert: The World Bank Headquarters, Washington D.C.
The development bank cut its 2022 growth forecast for East Asia and the Pacific (EAP) region to 5% from 5.4%, and warned that growth could slump to 4% if conditions weaken further, trapping 6 million more people in poverty.
It also lowered China's growth forecast, estimating that the world's second-largest economy will now grow at just 5% this year, sharply down on last year's 8.1%. That's also lower than China's official target of about 5.5%.
"Just as the EAP region was weathering the recurrent Covid-19 storms, three clouds have gathered over the economic horizon, which will mean lower economic growth and higher poverty," the WB said in its latest update on the region.
Higher US rates are likely to trigger capital outflows from developing economies and put pressure on their currencies, thus inducing "premature" financial tightening and hurting growth, the World Bank said.
Meanwhile, the resurgence of COVID in China, its zero-tolerance approach to controlling the spread of the virus, and troubles in the country's huge real estate sector could dampen regional exports.
"Specific shocks to economic activity in China, are likely also to affect EAP countries whose trade is increasingly oriented to China's markets," the bank said. China is witnessing its worst spike in COVID-19 cases since the original outbreak in Wuhan in 2020, and this has led to strict lockdowns in major cities.
Authorities in Shanghai, home to the nation's financial center and the world's largest container port imposed a phased lockdown on its 25 million residents last week.