The World Bank Group’s EAP Economic Update, released today, reports that economic growth in the East Asia and Pacific (EAP) region is projected to slow in 2026 due to external shocks.
Key points
- 📉 Regional slowdown: Growth in East Asia and Pacific is projected to fall from 5.0% in 2025 to 4.2% in 2026, mainly due to energy shocks from the Middle East conflict, trade barriers, and global uncertainty.
- 🇨🇳 China’s deceleration: China’s growth is expected to drop from 5.0% in 2025 to 4.2% in 2026 and 4.3% in 2027, with weak domestic demand and property sector challenges weighing heavily.
- 🌏 Rest of the region: Growth outside China will slow to 4.1% in 2026 but could rebound to 5.0% in 2027 if geopolitical tensions ease.
- ⚡ Energy shock impact: Countries more dependent on energy imports face greater risks. A sustained 50% rise in fuel prices could cut household incomes by 3–4%.
Regional growth is projected to slow to 4.2% in 2026 from 5.0% in 2025, as the energy shock due to the Middle East conflict compounds the adverse impact of elevated trade barriers, global policy uncertainty, and domestic economic difficulties.
China’s economic growth to slow from 5.0% in 2025 to 4.2% in 2026.
Growth in China, the region’s largest economy, is projected to decelerate from 5.0% in 2025 to 4.2% in 2026 and 4.3% in 2027, as weak domestic demand and property sector challenges persist, and the global slowdown dampens export growth. Growth in the rest of the region will slow to 4.1% in 2026 and is projected to rebound to 5.0% in 2027 as geopolitical tensions ease and uncertainty diminishes.
“Growth in East Asia and Pacific continues to outperform much of the world, even in uncertain times,” said Carlos Felipe Jaramillo, World Bank Vice President for East Asia and Pacific. “Yet, sustaining growth levels requires countries to confront structural challenges and seize the opportunity of the digital age to increase productivity and create more jobs.”
Rising fuel prices may lower regional household incomes
The impact of the Middle East conflict depends on each country’s reliance on energy imports, existing vulnerabilities, and economic policy flexibility. Prolonged and intensified conflict may further increase economic distress and reduce regional growth. A sustained 50 % increase in fuel prices could lead to a 3-4% loss in income for households in the region. Targeted support—for both the poor and the vulnerable and the small and medium enterprises—can help those most in need without fiscal strain.
“The region’s past resilience is remarkable, but present difficulties could increase economic distress and inhibit productivity growth,” said Aaditya Mattoo, World Bank Group Director of Research.
“Measured support for people and firms could preserve jobs today and reviving stalled structural reforms could unleash growth tomorrow.”
The report identifies surging AI-related exports and investment as a bright spot in 2025, especially in Malaysia, Thailand, and Viet Nam. AI could also lead to higher productivity growth, but adoption in EAP remains limited because of gaps in connectivity and skills. Only 13 to 17% of multinational subsidiaries in China and Thailand currently use AI, which is one third of the proportion in industrial countries.
Source : Energy Shock and Uncertainty Slow Growth in East Asia and Pacific
