Status: 09/27/2022 10:49 a.m
According to the latest World Bank forecast, China will lose its role as Asia’s growth engine this year. For the first time since 1990, other emerging economies are likely to grow faster.
In its latest forecast, the World Bank assumes that the Chinese economy will grow much more slowly this year than previously forecast. The Washington-based institute lowered its growth forecast from 4.3 percent to 2.8 percent.
For the first time since 1990, China would therefore grow more slowly than the emerging countries of the East Asia-Pacific economic area such as Vietnam, the Philippines, Malaysia and Indonesia. The globally active development bank is therefore more pessimistic than the International Monetary Fund (IMF) or the Industrialized Countries Organization (OECD), which so far still expect China’s gross domestic product to grow by 3.3 and 3.2 percent respectively.
Zero covid policy and real estate crisis
The World Bank cites China’s strict zero-Covid policy and the problems in the Chinese real estate sector as the main reasons for the significant forecast reduction. “China’s success in containing the Covid-19 infections comes with significant economic costs,” says the current study on the economic prospects of the emerging countries in East Asia and the Pacific region.
The temporary lockdown of entire cities has also left its mark on corporate profits. According to data from the National Bureau of Statistics (NBS), profits at China’s industrial companies shrank 2.1 percent year-on-year between January and August. By contrast, data for Chinese industrial production in August showed a year-on-year increase of 4.2 percent – faster growth than in July (3.8 percent). Analysts think China is unlikely to ease its “zero coronavirus” policy before the Communist Party congress in October.
US monetary policy as the greatest risk
The real estate crisis, which had reached a temporary peak a year ago with the problems of the real estate developer Evergrande, continues to smolder. According to the World Bank, prices, real estate sales and housing starts are currently declining.
However, the bank’s economists cited the aggressive tightening of monetary policy, particularly in the USA, as the greatest risk to their forecast. This particularly jeopardizes economic development in the emerging countries.