East Asia economic growth to slow due to war, energy costs - World Bank

Economic growth in East Asia Pacific will slow this year as war in the Middle East, and the elevated energy price and trade turmoil weigh on economies in the region, the World Bank said in its economic outlook for the region published on Wednesday.

The bank expects growth in the East Asia Pacific region to slow to 4.2 percent this year, from 5 percent in 2025, but edge back to 4.4 percent in 2027. In October, the lender predicted growth of 4.3 percent for this year.

China’s economic growth also projected to slow to 4.2 percent in 2026 - unchanged from its October forecast - and compared to 5 percent in 2025. The lender predicted a slight acceleration to 4.3 percent in 2027.

The bank said China faces weak domestic demand, continued issues in the embattled property sector and limited export growth due to a global slowdown.

Net energy importers such as Thailand, the Philippines and Pacific Island nations are the hardest hit but the current conflict, the World Bank said.

A US$20 (HK$156.6) increase in crude oil prices would raise inflation by 0.62 and 0.67 percentage points in the Philippines and Thailand after 6 months, the report said.

Tighter financing conditions, and reduced remittances from Gulf-based workers, could also hurt growth.

“Prolonged and intensified conflict” could worsen economic distress, the World Bank warned. A sustained 50 percent increase in fuel prices could cause a 3 percent-4 percent loss in income for households in the region.

The report encouraged countries to offer targeted support to the poorest individuals, and small and medium businesses, and for economies to harness artificial intelligence to boost growth more broadly.

“Sustaining growth levels requires countries to confront structural challenges and seize the opportunity of the digital age to increase productivity and create more jobs,” Carlos Felipe Jaramillo, World Bank Vice President for East Asia and Pacific, said in the report.

Reuters