NewsRescue
East Asia’s developing countries are seeing one of the lowest growth rates in five decades as a result of unfavourable variables such as US protectionism and rising debt levels, according to the Financial Times, citing World Bank data.
On Sunday, the organisation reduced its prediction for East Asia and the Pacific GDP growth to 4.5% from 4.8% before.
“The projections show that the region, one of the world’s main growth engines, is set for its slowest pace of growth since the late 1960s, excluding extraordinary events such as the coronavirus pandemic, the Asian financial crisis and the global oil shock in the 1970s,” the Financial Times reported.
Rising geopolitical tensions and the threat of natural disasters, notably extreme weather occurrences, provide significant downside risks to the region’s economic outlook, according to the World Bank. Softening global demand, as well as rising consumer, corporate, and government debt, have all hampered growth expectations.
According to the analysis, the implementation of new US industrial and trade policies under the Inflation Reduction Act and the Chips and Science Act in 2022 will have a negative impact on Southeast Asian countries. These policies, intended to increase US manufacturing and reduce American reliance on China, are said to have resulted in a drop in the region’s exports to the US.
According to the World Bank, electronics and machinery exports from China and Southeast Asian nations such as Indonesia, Vietnam, the Philippines, Malaysia, and Thailand have decreased since the new trade restrictions were implemented. According to the research, US trade with nations exempt from the restrictions, such as Canada and Mexico, has not decreased.
“This whole region, which had perversely benefited from US-China trade tensions in terms of [trade] diversion, is now suffering trade diversion away from it,” said Aaditya Mattoo, World Bank head economist for East Asia and the Pacific.