East Asia and Pacific Economic Update, April 2026: Industrial Policy in the Digital Age
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Washington, DC: World Bank
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Economic growth in East Asia and the Pacific (EAP) has remained resilient amidst increased trade restrictions
and still-elevated global policy uncertainty. Overall regional growth is projected to slow in 2026 but that is
largely because of deceleration in China amid persistent weakness in property-related investment and subdued
consumer confidence. Longer-term growth in the region’s economies, however, has been driven by capital
accumulation rather than productivity improvements. One reason is the changed pattern of structural change,
with labor increasingly moving out of agriculture and not into high productivity manufacturing or services, but
into lower productivity services. Another is that the leading regional firms are falling behind the global frontier
in the digital sectors where the world is seeing the most rapid innovation. In this context, industrial policy is
increasingly viewed by policymakers as a mean to open new development pathways. We suggest a practical,
three-principle approach to industrial policy. First, get the fundamentals right. Investments in education,
infrastructure, and government effectiveness typically yield the highest returns. Second, do no harm. Procompetition reforms—especially in services—can be powerful forms of industrial policy. Lastly, scrutinize
targeted interventions rigorously.