The World Bank has cut its economic forecast for the Asia-Pacific region, citing China’s ultra-strict “zero-COVID” policy as a drag on regional economy as the primary reason for the downgrade.
As China’s lockdowns continue to disrupt manufacturing and cut expenditure, the Washington-based financial organisation said on Tuesday that it expects the economies of the area to expand by 3.2 percent in 2022. This is a decrease from the 5 percent growth rate that was predicted in April.
According to the bank’s projections, economic growth in China, which has the world’s second-largest economy, is expected to reach 2.8 percent this year and 4.5 percent in 2023.
The financial institution had earlier forecast that China will rise by 5% in 2022.
After the Asian Development Bank (ADB) reduced its growth prediction for the region’s emerging nations for 2022 from 5.2 percent to 4.3 percent last week, the bank is the latest financial institution to drop its growth forecast for Asian economies.
China has maintained its commitment to a zero-tolerance approach that aims to eradicate the coronavirus at almost any cost. This is in spite of the fact that the rest of the world is moving in the direction of accepting the coronavirus.
The expansion of China’s gross domestic product (GDP) for the period of April-June was just 0.4 percent on an annual basis, which means that the country’s economy narrowly escaped recession during the second quarter.
The World Bank also identified aggressive interest rate rises by central banks as a threat to the prosperity of the area. These rate hikes were done in an effort to curb the region’s skyrocketing inflation.
“As nations prepare for slower global growth, they should address domestic policy inefficiencies that are an obstacle to longer term development,” said Manuela Ferro, Vice President of the World Bank’s East Asia and Pacific Region.