Several global factors are lengthening economic restoration for many countries in the APAC region.
By Zee Johnson
Economic recovery for emerging and developing countries in several regions of APAC has slowed. Thanks to rising inflation in the U.S., the war in Ukraine, and COVID-19 amongst other reasons, growth has been stunted for large importers and exporters like Mongolia, Lao People’s Democratic Republic, Malaysia, and Vietnam. A report from The World Bank East Asia and the Pacific Economic Update April 2022 found a stiff economic decline, going from 7.2% in the fourth quarter of 2021 to 5% this year.
“This increasing divergence of fortunes is especially troubling given the possibility of social discontent in developing countries,” said David Malpass, president of The World Bank Group in the company’s Global Economic Prospects, January 2022 report.
If global conditions don’t soon improve and national policy responses don’t become as strong as they need to be, the World Bank believes that growth could slow even more to 4%.
Below are the two major factors most impacting economies across the APAC region, according to the World Bank report.
The countries that lie closest to the Pacific have yet to feel the full impact of the Omicron variant and other smaller variants, though China has seen an increase in cases and even instated another lockdown. The ongoing pandemic continues to weaken domestic consumption, private investment, and tourism.
Developing economies lack the government backing needed to sustain growth in wake of adversity, especially when asset prices (like real estate and stock) skyrocket. Moreover, the governments that have had their debt as a share of GDP increase by 10% in the past two years will struggle even more to provide economic support. Unsurprisingly, low-income households have been hit the hardest by soaring prices and raised interest rates; all of which are drastically cutting into citizens’ real incomes.