Thailand’s 2019 GDP growth outlook is seen down to 3.5% from the 3.8% forecast in January, according to the World Bank’s latest “Global Economic Prospects” report.

Growth in East Asia and Pacific is slowing, largely due to a deceleration in China, and is projected to ease to 5.9% in 2019.

This is the first time since the 1997-1998 Asian financial crisis that growth in the region has dropped below 6%.

Domestic demand will continue to benefit from favorable financing conditions amid low inflation and rising capital flows in Cambodia, the Philippines, Thailand, and Vietnam.

Last October, the World Bank predicted that Southeast Asia’s second-largest economy would expand by 3.9% in 2019.

Bank of Thailand officials said recently that GDP would likely expand by less than the 3.8% forecast for this year.

Regional growth excluding China is forecast to decline to 5.1% in 2019 before inching up to 5.2 percent in 2020-21 as global trade rebounds.

Thailand and the Philippines will profit from large public infrastructure projects coming onstream in 2020-21. Growth in Indonesia is expected to accelerate marginally to 5.3% in 2020, reflecting continued support from strong infrastructure spending and robust private consumption.

In Malaysia, growth is expected to remain steady at 4.6% next year with weakening export activity offset by strong domestic demand in an environment of favorable financing conditions and low inflation.

Risks: escalation of trade tensions and non-financial sector debt in China

Risks to the outlook are tilted to the downside and have intensified amid re-escalation of trade tensions. They include the possibility of a sharper-than-expected downturn in major economies, including China, a further deceleration of global trade, intensification of trade disputes, or an abrupt change in global financing conditions and investor sentiment.

Non-financial sector debt in China is at high levels and high corporate indebtedness in sectors with weak profitability is a concern. Policy uncertainty around unresolved trade disputes between the United States and China remains high, and further escalation of trade tensions could have global and regional consequences.

The region could further be negatively impacted by a disorderly U.K. separation from the European Union as the United Kingdom is an important trading partner for several regional economies, especially Cambodia and Malaysia.