SINGAPORE—The World Bank said it expects developing economies in East Asia to grow faster than China this year for the first time since 1990, as the world’s second-largest economy struggles with a real-estate crunch and the government’s zero-tolerance approach to Covid-19.
The Washington, D.C.-based lender cut its forecast for Chinese growth this year but said it expects growth among 22 neighboring economies to more than double in 2022 compared with the pace they notched last year, as countries benefit from dismantling most Covid-19 restrictions and a revival in tourism.
The bank said the outlook for the region is threatened, however, by the risk that central banks including the U.S. Federal Reserve raise interest rates more aggressively than investors anticipate to contain galloping inflation. That could hurt global growth and fuel financial stress in heavily indebted emerging markets, it said.
The World Bank said in its latest assessment of the developing economies of East Asia and the Pacific that it expects China to expand 2.8% in 2022. That is down from a 4.3% forecast in June, and makes the World Bank gloomier on China’s prospects this year than the International Monetary Fund, which forecasts 3.3% growth, and some private-sector forecasts from banks including Goldman Sachs Group and Standard Chartered.
“China’s success in containing Covid-19 infections comes at a significant economic cost,” the lender said in a report published Monday. It also highlighted the drag from a severe real-estate downturn, with sales, prices and construction activity all falling as developers wrestle with heavy debts and consumers lose confidence in a market plagued by unfinished projects.