The lender now expects China to grow 8.5% this year compared to the 8.1% it forecast in April, though it cautioned the recovery is losing momentum. It slashed its outlook for East Asia and Pacific, excluding China, to 2.5% from the 4.4% previously expected. Overall regional growth is seen at at 7.5%, lifted by China.

Higher unemployment and inequality in the East Asia and Pacific region are emerging as key legacies of the crisis, the World Bank said.

“Covid-19 threatens to create a combination of slow growth and increasing inequality for the first time this century in the EAP,” the lender warned. “The result could be deprivation to an extent that the region has not seen in the last two decades.”

After weathering earlier pandemic waves better than other regions, the fast-spreading delta variant has thrown into turmoil factories and ports in countries that were once among the most successful at containing the virus. That’s compounding supply-chain blockages of manufactured goods.

Border and travel restrictions in the region continue to upend tourism and delay a full recovery, even as other parts of the world reopen.

In its report, the World Bank warned the pandemic will do lasting damage to economies by curbing public and private investment and through the loss of human and intangible capital. There is a risk of long-term economic scarring if the disease persists, the lender said.

“Policy actions must help economic agents not just to adjust today but also to make choices that avert deceleration and disparity tomorrow,” the lender said in its report.