World Bank slashes economic outlook for Asia over China slowdown

China’s economic growth is behind the rest of the Asia-Pacific region for the first time in more than 30 years, the World Bank said.

In a biannual report released on Tuesday, the Washington based financial institution downgraded the annual growth outlook for East Asia and the Pacific region from 5% to 3.2%.

The World Bank forecast GDP growth in China of 2.8% for 2022, while the rest of the region was expected to grow 5.3% on average. For 2023, the world’s second-largest economy was seen growing at 4.5%.

Covid-zero policies and the housing market crisis is paying a major tool on the Asian giant. China constitutes 86% of the region’s economic output.

“As they prepare for slowing global growth, countries should address domestic policy distortions that are an impediment to longer term development,” World Bank East Asia and Pacific Vice President Manuela Ferro in a statement.

The World Bank said high commodity prices and a post-pandemic rebound in domestic consumption were driving the Asia Pacific rise. But China’s strict commitment to its zero-Covid policy had disrupted industry as well as domestic sales and exports.

In August, new home prices in 70 Chinese cities fell by a worse-than-expected 1.3% year on year, worsening the economic outlook.