Developing Asia is set to register its first contraction since early 1960s as the coronavirus pandemic continues to disrupt global economic activity, the Asian Development Bank said Tuesday.
In its latest Asian Development Outlook Update, the lender said developing Asia’s gross domestic product will fall 0.7 percent in 2020, in contrast to a 0.1 percent rise estimated in June.
Nonetheless, the growth outlook for 2021 was upgraded to 6.8 percent from 6.2 percent. Despite the revision, GDP would be substantially below expectations before Covid-19.
Consequently, the regional recovery will be L-shaped or “swoosh-shaped” rather than V-shaped, the lender observed.
The lender cited threat of a prolonged Covid-19 pandemic and a return to more stringent containment measures as the main risk to the outlook.
The ADB cautioned that a return to more stringent containment measures could slow or even derail recovery and possibly trigger financial turmoil. Although economies in developing Asia remain resilient, the agency noted that continued policy support is needed to underpin recovery.
Excluding high-income newly industrialized economies, regional GDP is expected to contract by 0.5 percent this year before growing by 7.2 percent next year.
The two largest economies in the region are diverging as nascent recovery in the People’s Republic of China contrasts with continued fragility in India.
China’s GDP is forecast to grow 1.8 percent in 2020, unchanged from the previous projection, while the outlook for next year is revised up to 7.7 percent from 7.4 percent.
Meanwhile, the lockdown has stalled India’s economy, and the continuing outbreak looks likely to prevent economic activity from resuming fully in the remaining three quarters of FY 2020, the agency said. India’s GDP is forecast to contract sharply by 9 percent this year before rising 8 percent in 2021.
According to ADB, East Asia is slowing more this year but will rebound higher next year. The sub-regional forecast is for growth in both years, at 1.3 percent in 2020 and 7.0 percent in 2021.
South Asia sees economic woes deepen as Covid-19 spreads. The sub-region is now expected to shrink by a steep 6.8 percent this year and rebound by 7.1 percent in 2021.
Southeast Asia retrenches, waging tough battles with the virus. Strict quarantines and travel restrictions inflicted brutal second-quarter, the lender noted.
Projected sub-regional GDP is revised down by nearly 5 percentage points to 3.8 percent contraction in 2020, with the forecast rebound revised up by nearly 1 point to 5.5 percent growth in 2021.
Central Asian economic prospects continue to dim. Accordingly, sub-regional GDP forecasts are downgraded from low growth to 2.1 percent contraction in 2020 and tepid 3.9 percent growth in 2021.
The outlook for Pacific is revised down substantially, to 6.1 percent contraction this year and only minimal growth in 2021.
The inflation forecast for the whole region was revised down to 2.9 percent from 3.2 percent as the slowdown in demand is expected to outweigh inflationary supply-side disruptions. The forecast for 2021 was maintained at 2.3 percent.
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