The World Bank has warned that the war in Ukraine poses a threat to the recovery of developing East Asia and Pacific countries, which are currently struggling to deal with the impact of the Covid-19 pandemic.
The organisation stated in its “East Asia and Pacific Economic Update: Braving the Storms” report that shocks from the Ukraine war and economic sanctions against Russia were disrupting the region’s supply chain and slowing global growth.
The World Bank said that major exporters of fuel including Mongolia and Thailand were in danger of seeing a decline in real incomes, and countries with a high dependence on exports including Malaysia and Vietnam were exposed to financial growth shocks.
The group added that overall economic growth is currently predicted to slow to 5% in 2022, representing a 0.4% point dip from expectations in October.
Following worsening global conditions, growth would slow to an estimated 4%.
The World Bank warned that households could sink further into poverty and heavily indebted governments would further struggle to provide economic support.
“Just as the economies of East Asia and the Pacific were recovering from the pandemic-induced shock, the war in Ukraine is weighing on growth momentum,” said World Bank Vice President for East Asia and Pacific Manuela V. Ferro.
East Asia and Pacific Chief Economist Aaditya Mattoo added: “The succession of shocks means that the growing economic pain of the people will have to face the shrinking financial capacity of their governments.”
“A combination of fiscal, financial and trade reforms could mitigate risks, revive growth and reduce poverty.”
The World Bank explained four recommendations for policy action, including targeted household support instead of price control and unselective assistance to limit pain from economic shocks and facilitate growth-enhancing investment.
It also recommended stress-testing financial institutions to identify risks, reform trade-related policies in goods to enable the region to take advantage of movements in the international trade system, and invest in improvement of skills and enhanced competition to incentivise the adoption of new digital technologies.
