The World Bank reports that East Asia's economic growth is outpacing the rest of the world, but China's headwinds are slowing down the region's overall growth.

• The World Bank predicts that East Asia and Pacific's growth rate will decrease from 5.1% to 4.5% in 2024, due to challenges in China and policy uncertainties.
• The EAP region is expected to experience growth of 4.6% this year, surpassing the 4.4% growth predicted for 2023.
• According to Aaditya Mattoo, the East Asia and Pacific chief economist at the World Bank, China has become crucial for the region as a supplier of inputs, a market for value-added produce, and a source of investment.

Despite being the fastest-growing region in the world, East Asia and Pacific is expected to experience slower growth in 2024 due to challenges in China and broader policy uncertainty, as predicted by the World Bank.

Aaditya Mattoo, the East Asia and Pacific chief economist at the World Bank, stated on CNBC's "Street Signs Asia" on Monday that the region is still outperforming the rest of the world, but it is underachieving relative to its own potential.

The EAP update for 2024 predicts that growth in the region will decrease from 5.1% to 4.5% this year, despite having a population of over 2.1 billion people.

The region's growth is expected to increase to 4.6% in 2023, surpassing the 4.4% growth rate predicted for this year.

The report stated that the outlook is uncertain due to potential downside risks, such as a slowdown in the global economy, higher interest rates in major economies, global economic policy uncertainty, and geopolitical tensions.

The World Bank predicts that China's growth rate will decrease from 5.2% to 4.5% in 2024, despite the country's official target of 5% growth. This slowdown is due to a decline in consumer confidence, high debt levels, and a slumping real estate sector.

Mattoo stated that the factors that have caused a shift in production and investment from China could potentially affect production in other countries such as Vietnam and Mexico.

As a source of inputs, a destination for value-added produce, and a source of investment, China has become increasingly important for the region, as stated by the speaker to CNBC.

Since the early 2000s, the report noted that many countries in the EAP region have become increasingly dependent on external demand for export growth, with China being the primary destination for domestic value-added products. This is evident in countries like Malaysia, Thailand, Vietnam, and Lao.

The report emphasized that several countries in the region are connected to economic activity in the US and EU through trade linkages, including Cambodia, Malaysia, Philippines, Thailand, and Vietnam.

There are other factors limiting growth in the region.

Mattoo stated that while global trade is recovering, there is also an increase in protectionist policies.

"Financial conditions are easing, with inflation appearing to be under control, but high interest rates and a region with significantly higher debt levels persist."

To boost the region's economy, he suggested that "bold policy action" should be taken to "unleash competition, improve infrastructure, and reform education."

If China can successfully negotiate its shift to high-quality and sustainable growth while avoiding protectionism with other regional players, such as Malaysia, Indonesia, the Philippines, and Vietnam, it could serve as a powerful catalyst for economic growth, according to an economist.

At the China Development Forum in Beijing last week, the International Monetary Fund's Managing Director, Kristalina Georgieva, stated that "pro-market reforms" could significantly accelerate China's growth "more than a status quo scenario."