Major setbacks in East Asian countries in recovering from coronavirus add to concerns that the resurgent pandemic will widen the economic divide between the region and the Western world, according to the World Bank.
Since the second quarter, economic activity across the region, except notably for China, faltered amid outbreaks of the Delta variant. Additionally, relatively slow vaccine rollouts lead some multilateral institutions to cut growth forecasts for most economies in the region. Moreover, these led to a warning about longer-term problems such as rising inequality.
According to forecasts released on Tuesday by the World Bank Group, the economy of East Asia and the Pacific is on track to expand by 7.5% this year. The figure is up from its April forecast of 7.4% of which improvement will all come from China, now anticipated to rise 8.5%, up from 8.1%.
For the rest of the region, the outlook worsened. The bank is now forecasting growth of just 2.5% for 2021, down from 4.4% in April.
Manuela Ferro, an economist at the Washington, D.C.-based institution has said the economic recovery of developing East Asia and Pacific faces a reversal of fortune.
Goldman Cuts China’s Growth Estimates
Meanwhile, Goldman Sachs economists have cut their forecasts for the world’s second-largest economy’s growth in 2021, as it faces constraints on energy consumption.
The bank now expects China’s GDP to grow 7.8% in 2021 compared with a year ago. The figure is lower than its previous forecast for an 8.2% year-on-year expansion. Goldman’s downgrade came after similar moves by Nomura and Fitch.
In a report on Tuesday, the economists said that a relatively new, but tightening constraint on growth comes from increased regulatory pressure. That is to meet environmental targets for energy consumption and energy intensity.
In September 2020, Chinese President Xi Jinping announced that China is aiming to reach peak carbon emissions by 2030. Moreover, to become carbon neutral by 2060. That started national and local plans to lessen production of coal and other carbon-heavy processes.
Goldman also said, it has come on top of other economic risks for the country, such as a slowdown in property sales and construction activity. This follows a debt crisis facing real estate giant Evergrande, the bank said.
The bank added that regulatory tightening in other sectors and targeted restrictions to curb local Covid-19 outbreaks would also weigh down the Chinese economy.