World Bank Warns of Growth Slowdown in East Asia and Pacific in 2025

The latest World Bank 2025 Regional Economic Update warns that unless EAP countries implement strategic reforms and foster greater regional collaboration, the region risks losing its economic edge.

In 2024, the East Asia and Pacific (EAP) region emerged as a standout in global economic performance, outpacing most regions despite a backdrop of growing global uncertainty. However, the momentum that fueled this economic ascent is now under pressure from a complex set of challenges—including decelerating global growth, rising trade restrictions, climate risks, and demographic shifts. The latest World Bank 2025 Regional Economic Update warns that unless EAP countries implement strategic reforms and foster greater regional collaboration, the region risks losing its economic edge.

Economic Forecasts Signal Slowing Growth

The World Bank projects that the region’s economic growth will moderate from 5.0 percent in 2024 to 4.0 percent in 2025. This anticipated slowdown reflects both external headwinds and internal structural constraints. China, the largest economy in the region, is expected to grow at 4.0 percent in 2025—significantly below its previous decade-long average. Similarly, Malaysia is forecasted to expand by just 3.9 percent, while Thailand may grow at a mere 1.6 percent, underlining the fragile state of recovery in some EAP economies.

Other growth estimates for 2025 include:

• Philippines: 5.3%

• Viet Nam: 5.8%

• Indonesia: 4.7%

• Cambodia: 4.0%

• Mongolia: 6.3% (the highest in the region)

• Lao PDR: 3.5%

• Pacific Island countries (average): 2.5%

Despite the deceleration, the region continues to make strides in reducing poverty. Approximately 24 million individuals are projected to move above the upper-middle-income poverty line between 2024 and 2025—a testament to the resilience of regional economies and past investments in inclusive growth.

Global Uncertainty Dampens Investment and Trade

The global economy's volatile landscape has dampened investor and consumer confidence, curbing both domestic and foreign investments across EAP. Trade tensions, protectionist policies, and the slowing global demand are expected to exert further downward pressure on exports—traditionally a major engine of growth for the region.

“While navigating global uncertainty, countries across EAP have the opportunity to strengthen their economic prospects by embracing and investing in new technologies, opening up business opportunities through bolder reforms, and deepening international cooperation,” emphasized Manuela V. Ferro, Vice President of the World Bank for East Asia and Pacific.

A Three-Pronged Strategy for Sustained Prosperity

To ensure long-term prosperity, the World Bank is urging EAP nations to adopt a holistic policy approach centered on three pillars:

1. Harnessing New Technologies: Emerging digital tools and automation technologies offer substantial potential to improve productivity and stimulate job creation. For example, Malaysia and Thailand have made strides in integrating technology across sectors such as manufacturing and services, leading to enhanced efficiency and competitiveness.

2. Undertaking Bold Domestic Reforms: Structural reforms, particularly those promoting competition in the service sectors, can catalyze innovation and drive private sector-led growth. Viet Nam has already demonstrated success by liberalizing sectors like logistics and finance, spurring entrepreneurship and attracting foreign investment.

3. Enhancing Regional and Global Cooperation: Strengthening regional economic integration and multilateral cooperation is vital in building resilience against global shocks. This includes commitments to green transitions, shared infrastructure investments, and coordinated responses to cross-border challenges like climate change and labor mobility.

Demographics and Climate Add Complexity

Beyond economic policies, demographic transitions and environmental risks present formidable challenges for EAP governments. Rapid aging in several countries, particularly in Northeast Asia, threatens to shrink the workforce and increase public expenditure on health and pensions. Meanwhile, the region remains one of the most vulnerable globally to climate-related disasters, including rising sea levels and extreme weather events.

To cope with these challenges, policies must not only aim for short-term growth but also focus on inclusiveness and sustainability. Investing in human capital—particularly in skills aligned with the digital economy—and in climate-resilient infrastructure will be critical.

Path Forward: Innovation, Inclusivity, and Resilience

“Combining new technologies with bold reform and innovative cooperation could help countries in the region cope with current environment and longer-term challenges,” said Aaditya Mattoo, Chief Economist for East Asia and Pacific at the World Bank. “That is the recipe for higher productivity and better jobs.”

The EAP region stands at a pivotal moment. With proactive and forward-thinking strategies, it can turn current uncertainties into new opportunities. But the path forward will require a collective resolve to innovate, reform, and unite across borders for a resilient and inclusive future.