The growth of East Asia surpasses the global average, but uncertainties in China are having an impact – World Bank.

The Asia-Pacific region will remain the only area where real wage growth is expected in 2023, according to ECA International.

The East Asia and Pacific region is outpacing the rest of the world in development; however, in 2024, due to unfavorable conditions in China and broader political uncertainty, growth in this region will slow down, says the World Bank. "This is a region that still outperforms the rest of the world, but there is less potential being realized than is possible," said Aditi Mattu, the World Bank's chief economist for East Asia and the Pacific, in an interview with CNBC.

Growth in the region is expected to slow to 4.5% this year after expanding by 5.1% last year, according to the World Bank's updated East Asia and Pacific report for 2024, published on Monday. The region is home to more than 2.1 billion people. However, excluding China, growth in the region is expected to reach 4.6% this year, up from 4.4% in 2023. "The forecast is subject to downside risks, which include a greater-than-expected slowdown in the global economy, stable interest rates in major countries, increased uncertainty regarding economic policy worldwide, and heightened geopolitical tensions," the report states.

While China has set an official growth target of around 5% for 2024, the World Bank forecasts that the growth of the largest economy in Asia will slow to 4.5% this year after expanding by 5.2% last year. The country's slowdown is attributed to consumer confidence in the domestic market, as well as high levels of debt and a downturn in the real estate market. This has led to a shift in production and investment away from China, which could ultimately impact manufacturing in other countries such as Vietnam and Mexico.

The report emphasizes that the region is also constrained by other factors. "Global trade is recovering, but at the same time, we are seeing a surge in protectionism," said Mattu. "We see a softening of financial conditions, such as the dominance of inflation, but at the same time, we see high interest rates and a region where the debt level is significantly higher than before the pandemic." He added that "decisive policy measures" are needed to "unleash competition, improve infrastructure, and implement education reforms" that can contribute to the development of the region's economy.

At the same time, if China can transition to high-quality and sustainable growth and avoid protectionism with other players in the region, such as Malaysia, Indonesia, the Philippines, and Vietnam, this could become a powerful catalyst for growth, according to the economist. Last week at the China Development Forum in Beijing, International Monetary Fund Managing Director Kristalina Georgieva advocated for "pro-market reforms" that could significantly accelerate China's growth compared to the current status quo.