The damage from the COVID-19 pandemic to economies in the Asia-Pacific region is predicted to reach US$3 trillion over two years, S&P Global Ratings said on Friday.
The latest estimate is higher than the US$2 trillion in lost economic output that S&P in April forecast for the region in April.
Based on its estimate, economic growth across the region this year would contract by 1.3 percent, compared with the 0.3 percent growth the ratings agency previously forecast.
However, regional economies would recover next year with 6.9 percent growth, S&P said.
“Asia-Pacific has shown some success in containing COVID-19 and, by and large, responded with effective macroeconomic policies,” S&P Global Ratings Asia-Pacific chief economist Shaun Roache said in a statement. “This can help cushion the blow and provide a bridge to the recovery.”
The IMF last week said in its latest World Economic Outlook report that growth in Asia’s emerging and developing economies this year would likely contract 0.8 percent before rebounding next year with 5.9 percent growth.
S&P retained its forecast that Taiwan’s and South Korea’s economies this year would shrink by 1.2 percent and 1.5 percent respectively, citing the nations’ success in containing COVID-19, a swift reopening of their economies, governments’ targeted fiscal easing and support from the resilient technology sector.
The ratings agency also held its growth forecast for China at 1.2 percent this year and 7.4 percent next year, but warned that China’s private-sector confidence remains fragile.
S&P cut its forecast for Japan’s economy, saying it would contract by 4.9 percent this year and grow 3.4 percent next year, adding that consumers have not recovered from the effects of last year’s consumption tax.
“We expect cautious consumers in Japan to save more than before COVID-19, and this will crimp spending and growth,” Roache said.
The agency further lowered its forecast for India’s economy to a 5 percent decline this year, compared with the 1.8 percent growth that S&P previously predicted, citing the country’s difficulties containing the virus, an anemic policy response and underlying vulnerabilities, especially across its financial sector.
S&P also cut its growth forecasts for Indonesia from 1.8 percent to 0.7 percent this year and predicted that Malaysia’s economy would contract by 2 percent, compared with a decline of 1.1 percent it estimated earlier.
The agency said that Thailand’s economy would fall 5.1 percent this year, down from a 4.2 percent contraction it forecast previously.
While most economies in the Asia-Pacific region would see a sharp bounce next year, the recovery looks set to be weighed down by weak balance sheets, as governments, companies and households might try to bolster their weak financial positions by saving more, paying down debt and spending less, S&P said.
“The downturn caused by COVID-19 did not start as a balance-sheet recession, but may end up as one,” Roache said. “This means less investment, a slower recovery and a permanent hit to the economy that will last even after a vaccine is found.”
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