World Bank: "Korea-Japan Trade Dispute Poses Risk to Asian Economy"

Slowing Growth in East Asia-Pacific Region Cited as Reason
Global Economic Growth Forecast for This Year Set at 2.5%
Converted at PPP Exchange Rates, Level Is 3.2%, Compared to 3.4%, OECD Forecasts 2.9%

[Asia Economy Reporter Kim Hyunjung] The World Bank has diagnosed that the trade conflict between Korea and Japan could act as a risk factor for economic growth in East Asia and the Pacific this year. It also expressed concerns about the global decline in productivity and the rapid increase in debt in emerging countries.

The World Bank (WB) announced on the 8th (local time) that it lowered its global economic growth forecast for this year to 2.5%, down 0.2 percentage points from the June forecast last year (2.7%). It predicted a moderate rebound in the medium to long term, with growth rates of 2.6% in 2021 and 2.7% in 2022.

This forecast, when converted using the purchasing power parity (PPP) exchange rate, which is the standard used by the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD), rises to about 3.2%. Previously, the IMF projected global economic growth at 3.4% this year, and the OECD forecasted 2.9%.

The World Bank expects advanced economies to grow by 1.4%, down 0.1 percentage points from the previous estimate due to continued manufacturing weakness and trade disputes. Emerging markets and developing countries are expected to grow by 4.1%, a 0.5 percentage point downward revision due to slowing trade and investment.

In particular, it pointed to the Korea-Japan trade tensions as an economic risk factor in the East Asia and Pacific region, forecasting a slowdown in growth. Along with the slowdown in China's economic growth and the US-China trade dispute, the impact of the Korea-Japan trade conflict is expected to shrink international trade volume, resulting in a growth rate of 5.7% this year, down from 5.8% last year.

By region, Europe and Central Asia are expected to see growth increase from 2% last year to 2.6% this year due to recoveries in Turkey and Russia. Latin America is expected to improve to 1.8% growth from 0.8% last year, thanks to improved investment conditions in Brazil and easing market crises in Argentina. The Middle East and North Africa region is expected to see growth rise to 2.4%, but South Asia (5.5%) and Sub-Saharan Africa (2.9%) are projected to be slower than expected.

Along with this, the World Bank advised in its report that emerging and developing countries should use price control policies more cautiously. It also recommended improving productivity through ▲promotion of human capital and physical investment ▲strengthening corporate capabilities for technology adoption and innovation ▲creating growth-friendly macroeconomic and institutional environments, and strengthening debt management through ▲establishing sound debt management systems ▲stable financial regulation and supervision. It emphasized the need for stable inflation maintenance in low-income countries.

This content was produced with the assistance of AI translation services.