Recoveries from the pandemic remain incomplete in many countries, with elevated costs of living tempering the growth of consumption. Growth in Sub-Saharan Africa is projected to slow to 3.2 percent in 2023, as external headwinds, persistent inflation, higher borrowing costs, and increased insecurity weigh on activity. The materialization of such risks could worsen economic and humanitarian crises in Afghanistan and Sri Lanka and/or give rise to crises in other economies in the region. Risks to the outlook are mainly to the downside and include adverse spillovers from possible further advanced-economy monetary policy tightening or banking sector stress, sharper-than-expected tightening of domestic macroeconomic policies to anchor inflation expectations or stabilize foreign exchange reserves, social tensions arising from food insecurity, and extreme weather events related to climate change. The lagged impact of tightening domestic policy and global financial conditions, and the aftermath of crises and natural disasters in several economies, are expected to temper growth in 2024. Unexpected resilience in private consumption and investment, and robust growth in the services sector in India, underlie an upward revision to growth in 2023. Growth in South Asia is expected to slow marginally in 2023, to 5.9 percent, and more significantly in 2024, to 5.1 percent.
Downside risks to the outlook include tighter-than-expected global financial conditions stubbornly high inflation protracted weakness in China’s property sector geopolitical tensions and, particularly for smaller economies, natural disasters, including climate-change-related extreme weather events. In 2024, growth in EAP is projected to ease to 4.6 percent as the effects of China’s reopening fade. Regional trade growth will remain subdued amid weak global demand and domestic services-led growth in China. Growth in the region excluding China is set to slow to 4.8 percent in 2023 from 5.8 percent in 2022, as the boost from earlier reopening fades in several large economies. Projected growth in China this year has been revised upward following a faster-than-expected reopening of the economy, which is bolstering near-term consumer spending, particularly on services. Growth in the East Asia and Pacific (EAP) region is projected to strengthen to 5.5 percent in 2023 from 3.5 percent in 2022, as a recovery in China offsets slowing activity in most other regional economies.
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