China is expected to lead the recovery of East Asian and Pacific economies this year, but many nations will record sub-par growth as they struggle to emerge from the coronavirus pandemic, according to new World Bank forecasts released on Friday. The World Bank’s latest East Asia and Pacific Economic Update predicts China’s economy will expand by 8.1 per cent in 2021, compared with 2.3 per cent the previous year, powering a 7.4 per cent region-wide expansion, up from 1.2 per cent in 2020. Excluding China, by far the region’s biggest economy, growth will only be 4.4 per cent in East Asia and the Pacific, an improvement on a 3.7 per cent contraction the year before but still below the long-term average. China set an economic growth target of “above 6 per cent” for 2021, but Premier Li Keqiang admitted earlier this week that growth this year could exceed a target. Like Hydra, the many-headed monster of Greek myth, Covid-19 is proving hard to suppress even a year after the first case was confirmed in Wuhan World Bank Vietnam is the other outstanding economic performer with an expected growth rate of 6.6 per cent, up from 2.9 per cent. China and Vietnam were among the relatively few countries that were only lightly hit by the pandemic and did not fall into recession in 2020. “Like Hydra, the many-headed monster of Greek myth, Covid-19 is proving hard to suppress even a year after the first case was confirmed in Wuhan,” the World Bank said. It noted that economic growth for individual nation-states “will depend on containing the novel coronavirus; their ability to take advantage of a revival of international trade; and the capacity of governments to provide fiscal and monetary support”. “Global economic recovery, supported in part by the significant US stimulus, will revive trade in goods and could provide an external boost to growth of as much as 1 percentage point on average,” the report said. “But global tourism is expected to remain below pre-pandemic levels till 2023 and delay economic recovery in tourism-dependent economies.” The World Bank said “successful vaccination campaigns and early control of the pandemic, together with significant policy reform and the diffusion of new technologies” could lead to better-than-expected growth. Slow suppression of Covid-19, however, could lead to worse-than-anticipated economic activity, increasing the risk of the emergence of new variants that could be more infectious, lethal and resistant to existing vaccines. On Thursday, China’s central bank estimated the maximum the economy can expand without fuelling inflation, known as the potential growth rate, is under 6 per cent in the next five years. The statistics department of the People’s Bank of China (PBOC) said potential growth was projected at 5 per cent to 5.7 per cent in the period covering the government’s latest five-year plan through 2025. That represents an overall “medium to high” growth rate, it said. Potential output measures the maximum sustainable expansion of gross domestic product without causing inflation. The objective of monetary policy should be to match actual output with potential, and the support of monetary policy to the real economy should be in line with the expansion of potential gross domestic product (GDP), according to the paper released on Thursday. The PBOC’s paper points out that traditional large-scale fiscal and monetary stimulus policy will not be able to lift real GDP growth above potential. Such stimulus would only lead to inflation and a rapid increase in the debt ratio, causing systemic risks to the economy, it said. The central bank is seeking to dial back the stimulus it pumped into the economy last year, concerned by the build up in debt and the risk of asset bubbles. China debt: how big is it and who owns it? At its quarterly meeting this week, the PBOC’s monetary policy committee reiterated its stance of keeping policy flexible and appropriate. However, a statement released Thursday after the meeting omitted previous phrasing used by the PBOC of “no sharp turn” in policy, suggesting policymakers are giving themselves more room to act if needed. Chen Xi, a fixed income analyst at Pacific Securities, wrote in a note that the shift in language could mean the PBOC is taking a more flexible approach to policy fine-tuning based on current economic conditions.