World Bank projects East Asia and Pacific growth to slow to 4.2% in 2026 as Middle East energy shock and uncertainty weigh

The World Bank published its East Asia and Pacific (EAP) Economic Update projecting regional growth to slow to 4.2% in 2026 from 5.0% in 2025, citing an energy shock linked to the Middle East conflict alongside elevated trade barriers, global policy uncertainty, and domestic economic difficulties. The update argues for targeted support to households and small and medium enterprises, alongside renewed structural reforms to protect jobs and lift productivity. China is projected to decelerate from 5.0% growth in 2025 to 4.2% in 2026 and 4.3% in 2027, reflecting weak domestic demand, continued property sector challenges, and softer exports. Growth in the rest of the region is projected at 4.1% in 2026, rebounding to 5.0% in 2027 as geopolitical tensions ease and uncertainty diminishes; the report also warns that a sustained 50% increase in fuel prices could reduce household incomes in the region by 3% to 4%. It highlights AI-related exports and investment as a 2025 bright spot, but notes limited adoption, with only 13% to 17% of multinational subsidiaries in China and Thailand using AI, and finds that industrial policy has supported growth and more productive jobs in cases such as the Republic of Korea, Malaysia and more recently Viet Nam where foundations and openness were stronger.