Kuala Lumpur, 08 October 2025 — The East Asia and Pacific region continues to stand out globally for its growth performance, but the World Bank warns that its ability to sustain that lead will depend heavily on structural reforms across labor, competitiveness, and governance. In its October 2025 Economic Update for the region, the Bank paints a picture of strong momentum but also mounting challenges.
The Bank now projects regional growth of 4.8 percent in 2025, slightly down from 5.0 percent in 2024, and expects growth to moderate further to 4.3 percent in 2026 amid global headwinds, slowing external demand, and rising trade tensions.
Among country forecasts, Vietnam is expected to lead with 6.6 percent growth, followed by Mongolia (5.9 percent) and the Philippines (5.3 percent). Meanwhile, China, Cambodia and Indonesia are each projected to grow by 4.8 percent, while Thailand is expected at the lower end at 2.0 percent.
Strengths & Risks: Where the Region Stands
The report acknowledges that East Asia and the Pacific have advantages that allow them to outperform many peers, including demographic advantages, well-developed manufacturing bases, openness to trade, and ongoing digital and tech adoption.
Yet, the World Bank cautions that much of the recent job growth has occurred in low-productivity, informal service sectors, which offer limited upward mobility. Youth unemployment pressures are rising, while female labor force participation remains constrained in many economies.
The Bank’s vice president for East Asia and Pacific, Carlos Felipe Jaramillo, described a “jobs paradox”, strong macro growth but insufficient creation of high-quality, formal job opportunities.
To address these challenges, the Bank calls for bold structural reform: lowering barriers to firm entry and competition, improving the business environment, investing in human capital, aligning workforce skills with evolving technologies, and accelerating adoption of AI and digital platforms.
Domestic policy choices loom large: countries that rely on cyclical stimulus or protective measures may see only short-lived gains, while those that push reforms stand a better chance of sustaining inclusive growth.
Implications for Asia & Investors
- Investment in reforms is now critical: Countries lagging in regulatory efficiency, digital infrastructure, and labor flexibility may see capital flows bypass them in favor of more dynamic economies.
- Growth premium may shift: Markets may begin rewarding nations with credible reform pathways, potentially revaluing sovereign risk and equity premiums in the region.
- Sectoral shifts: As demand for higher value-added services and green technologies intensifies, economies must pivot toward productivity enhancements in manufacturing, services, and tech.
- Labor & skills investment: The twin forces of automation and AI could displace many jobs; nations must scale reskilling, lifelong learning, and education reforms to maintain competitiveness.
- Regional spillovers: Stronger growth in leading economies (e.g. Vietnam, China) may catalyze investment and supply chain expansion elsewhere in ASEAN, but only if policy frameworks are aligned.
