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Asia Set to Lead World Economic Growth pushed by China’s Reopening
Asia and the Pacific is a relative bright spot amid the more somber context of the global economy’s rocky recovery.
As the Chart of the Week shows, the region will contribute about 70 percent of global growth this year—a much greater share than in recent years. Our latest Regional Economic Outlook describes the resilience of the world’s most dynamic region and important challenges facing its policymakers.
Main Drivers of Growth
Growth in Asia and the Pacific is forecast to accelerate to 4.6 percent this year from 3.8 percent last year. The main development has been the reopening of China, where surging consumption is boosting growth across the region despite weaker demand from the rest of the world. China and India together are forecast to generate about half of global growth this year. Other factors supporting growth include the easing of lockdowns in some countries, higher commodity prices, and continued policy support.
Key Risks and Challenges
Risks to the outlook include spillovers from greater-than-expected US monetary policy tightening and supply chain disruptions associated with geoeconomic fragmentation. The pandemic also remains a major threat, especially for countries with low vaccination rates and limited fiscal space. In the short term, monetary and fiscal policies will need to remain tight to bring inflation durably back to central bank targets and stabilize public debt. An integrated policy response using all available tools will be needed to manage global shocks.
While Asia’s financial systems haven’t seen major impacts following recent banking turmoil in the United States and Europe, they need to be carefully monitored given high leverage among households and corporates.
In the longer term, the Chinese economy that has been the primary engine of regional and global growth for decades is expected to slow considerably in the face of unfavorable demographics and a productivity slowdown. The region should prioritize structural reforms to boost long-term growth, including through innovation and digitalization, while accelerating the green energy transition.
Asia and the Pacific remains a key driver of global economic growth, but it faces significant challenges and uncertainties in the post-pandemic era. The region needs to balance short-term stabilization with long-term transformation to ensure a sustainable and inclusive recovery.
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