Developing economies in East Asia and the Pacific (EAP), already struggling with international trade tensions and COVID-19 (coronavirus), now face the prospects of a global financial shock and recession as the pandemic hit major economies around the world.
This represents an unusual combination of disruptive and mutually reinforcing events. Significant economic pain seems unavoidable in all countries. In a rapidly changing environment, making precise growth projections is unusually difficult. Therefore, meaningful projections would constitute both a baseline and a lower-case scenario.
Growth in developing EAP* is projected to slow to 2.1% in the baseline and to a negative 0.5% in the lower-case scenario in 2020, from an estimated 5.8% in 2019. Growth in China is projected to decline to 2.3% in the baseline and 0.1% in the lower-case scenario in 2020, from 6.1% in 2019.
Growth in the region excluding China is projected to slow from 4.7% in 2019 to 1.3% in the baseline scenario and negative 2.9% in the lower-case scenario in 2020, and is projected to rebound gradually in 2021 as the effects of the virus dissipate.
The COVID-19 shock will also have a serious impact on poverty reduction across the region, with an estimated 24 million fewer people escaping poverty in 2020 than would have in the absence of the pandemic (using a poverty line of US$5.50/day). If the economic situation were to deteriorate further, then poverty is estimated to increase by about 11 million people.
This stands in contrast to the trend over the past two decades, which have seen poverty decrease dramatically across most of developing East Asia. The rapid growth in labor incomes among the poor, along with low unemployment, public transfers (such as pensions, cash transfers, and unemployment insurance, among others), structural transformations, and public investments contributed to the decline.
Other challenges remain. Rapid urbanization and business demands are feeding a massive need for investment in infrastructure across the region, such as electricity access, adequate sanitation, and broadband infrastructure and connectivity. Fragility and conflict are also intensifying in some countries.
East Asia and the Pacific is the epicenter of the double burden of stunting and obesity—both forms of malnutrition. Stunting significantly reduces the physical and mental capabilities of children, imposing enormous human and economic costs. In Indonesia, for example, where 30.8% of children are stunted, economic losses associated with stunting are estimated at 2-3% of GDP. Rates of overweight/obesity among women are alarming in some countries, ranging between 40% and more than 80%.
The region includes 13 of the 30 countries that are most vulnerable to climate change. It also bears the brunt of 70% of the world’s natural disasters, which have affected more than 1.6 billion people in the region since 2000. Pacific Island countries, where rising sea levels are threatening coastal areas and atoll islands, have been hit hard by disasters exacerbated by climate change, including Category Five Tropcial Cyclone Harold, which left a path of destruction across Fiji, Tonga, Solomon Islands, and Vanuatu in April 2020.
East Asia and the Pacific is also the largest contributor to greenhouse gas emissions, accounting for one-third of the world’s carbon dioxide emissions and 60% of its coal consumption. Curbing emissions in the region is critical to advancing the global climate change agenda. The World Bank is working with governments, the private sector, and other development partners on a range of innovative solutions to support greener and cleaner energy policies.
*Based on country-level data available as of March 27, 2020.
Last Updated: Apr 16, 2020