Global trade barriers and policy uncertainties are hindering economic growth in Asia, according to a report released by the World Bank. The region is forecasted to experience a slowdown in growth to 4.5% this year, down from 5.1% in 2023. Despite this, Asia continues to outperform other parts of the world, with a rebound in global trade expected to help offset weaker growth in China. However, the report highlights key risks such as higher interest rates and trade-distorting measures that could impact the region’s economic prospects.
One of the main challenges facing Asian economies is the lack of significant contributions from leading firms in the region. The report emphasizes the importance of addressing long-term issues such as weak social safety nets and underinvestment in education to drive sustainable growth. China, which aims for about 5% growth this year, is facing difficulties in transitioning to a more balanced growth path. The country must focus on implementing efficient policies that address structural imbalances and encourage greater household spending to boost overall demand.
The report stresses the need for improved productivity and efficiency in the region, citing Vietnam as an example of a country with untapped potential. Despite drawing significant foreign investment, Vietnam’s growth rate of about 5% is below its capacity, highlighting the need for reforms to unlock its full economic potential. The report also points out the lagging improvements in productivity among leading companies in Asia, especially in technology-related areas. It calls for governments to remove restrictions on investment, enhance skills development, and strengthen management to boost competitiveness.
To address these challenges, the World Bank recommends opening up to more competition and investing in education to drive innovation and growth in the region. Stronger social welfare programs and other initiatives that encourage household spending are also crucial to stimulate demand and drive business investment. The report underscores the importance of choosing efficient policies that address structural imbalances and promote sustainable growth. By focusing on these key areas, Asian economies can unlock their full potential and achieve greater economic success.
