GDP growth in the East Asia and Pacific (EAP) region remains above the global average but is projected to slow down in 2025 and even further in 2026.
Growth in China, the region’s largest economy, is projected to decline from 4.8 percent this year to 4.2 percent in 2026. The rest of the region is projected to grow by 4.4 percent in 2025 and 4.5 percent in 2026. The Pacific Island Countries are projected to grow by 2.7 percent in 2025 and 2.8 percent in 2026.
The sluggishness is due to a less favorable external environment—rising trade restrictions, easing but still elevated global uncertainty, and slowing global growth—and domestic policy choices, especially the reliance in some countries on fiscal stimulus rather than structural reform:
Global financial markets have so far defied recent policy turbulence. Therefore, even as EAP countries face real challenges, they are experiencing more benign financial conditions.
EAP real interest differentials with advanced economies have widened, leading to capital inflows and appreciation of currencies.
Even in a difficult external environment, EAP countries can forge a dynamic path. But supporting near term growth through fiscal measures may deliver less durable development benefits than deeper domestic reforms.
The latest available data across all reform areas suggest that there are still sizeable gaps in reforms of developing EAP countries relative to a sample of advanced economies.
The young struggle to find jobs in China, Indonesia and some other countries.
Most people in the EAP region who are seeking work, find it. The employment rate is generally high compared to other regions.
Improving labor productivity is vital for most EAP countries, since it remains relatively low and below the global average, except in China and Malaysia.
Creating job opportunities is important for the Pacific Islands as the share of the working-age population in employment is below the global average.
Economic opportunities and human capacities are interdependent, and jobs are the outcome of their dynamic interplay.
Drivers of Capacities and Opportunities
Source: EAPCE’s illustration.
Reforms to create more productive jobs in EAP must:
(1) Policies to boost productivity, expand economic opportunities, and strengthen resilience by harnessing technological change, advancing domestic reforms, and deepening international cooperation;
(2) Policies to support labor markets harness the productivity potential of new digital technologies.
(3) Policies to support firms leverage new technologies and help spur EAP firms productivity so they can catch up with global leaders.
(4) Policies to harness the potential of services to drive economy-wide growth and job creation
(5) Policies to face up to the major challenges of de-globalization, aging and climate change
(6) Policies to address new and old distortions in the areas of food, fuel and finance.
(7) Policies to encourage technology diffusion and adoption
(8) Creating opportunities for firms and ensuring inclusion to promote equitable growth;
(9) Trade reform, especially of still-protected services sectors—finance, transport, communications—to enhance firm productivity, avert pressures to protect other sectors, and equip people to take advantage of the digital opportunities whose emergence the pandemic is accelerating;
(10) Financial sector policies to support relief and recovery without undermining financial stability;
(11) Support for firms to prevent bankruptcies and unemployment, without unduly inhibiting the efficient reallocation of workers and resources;
(12) Social protection to help households smooth consumption and workers reintegrate as countries recover;
(13) Smart schooling to prevent long-term losses of human capital, especially for the poor;
(14) Smart containment of COVID-19, especially through non-pharmaceutical interventions like testing-tracing-isolation;
(15) Climate policy to build back better;
(16) Fiscal policy for relief, recovery, and growth;
(17) Vaccination to contain COVID-19.
