Scrape off the existing plaster with a drywall knife where it's peeling above the shower. Scrap it enough to access the drywall tape underneath. Pull off the tape slowly, so it takes the rest of the plaster with it as it comes off, exposing the seam between the two sheets of drywall. Expose as much of the seam as necessary over the whole damaged area.
Set mesh drywall tape over the exposed seam, pressing it with the palms of your hands so it sticks to the seam.
Spread joint compound, or mud, over the mesh tape, using the drywall knife. Cover the line of tape completely, making the seam of plaster about 4 inches wide. Smooth and flatten it.
Allow the joint compound dry for six to eight hours. Use the drywall knife to scrape off any raised areas.
Apply a second layer of joint compound over the seam, making it a little wider (about 6 inches). Get it smooth and flat with the knife.
Allow the second coat of compound to set, then use the drywall knife to scrape it flat and smooth. Add a third layer of compound about 10 inches wide.
Allow the third coat of compound to set for 12 hours. Sand the mudded area flat and smooth, using the drywall pad sander. The wall is ready to repaint.