The COVID-19-battered economy of developing Asia is to shrink for the first time since the early 1960s, with the level of output next year expected to remain below pre-pandemic projections even as growth recovers, a report released yesterday by the Asian Development Bank (ADB) said.
The region’s GDP this year is to fall 0.7 percent, down from June’s projection of an increase of 0.1 percent, the bank said.
A contraction this year would be the first since 1962, ADB chief economist Yasuyuki Sawada said in a live-streamed briefing.
“The economic threat posed by the COVID-19 pandemic remains potent, as extended first waves or recurring outbreaks could prompt further containment measures,” Sawada said.
Downturns across developing Asia are more widespread than previous crises, with three-quarters of economies in the region tipped to shrink this year, he said.
China is to buck the trend and is forecast to expand 1.8 percent this year — unchanged from June’s projection — as successful public health measures provide a springboard for growth, the ADB said.
Growth next year is forecast to accelerate to 7.7 percent, up from a previous forecast of 7.4 percent.
In India, where lockdowns have stalled private spending, GDP this year is to shrink by 9 percent, sharply down from June’s forecast of minus-4 percent, the ADB said.
There were also big downgrades for the Philippines and Thailand, which are now projected to contract 7.3 percent and 8 percent respectively.
The downgrades took into account that the pandemic has been “more serious” than initially anticipated, Sawada said in an interview with Bloomberg TV yesterday. “Having said that, our baseline assumption is that health risks will be basically contained within this year.”
“Large-scale” fiscal stimulus has helped cushion the blow and provides a base for a rebound, Sawada said.
Regional governments have promised US$3.6 trillion, equivalent to about 15 percent of regional economic activity, in subsidies, loans and other support for individuals and businesses, but small companies that account for most business in the region are short of capital to weather the crisis, the ADB said.
Next year, growth in developing Asia — a region that excludes advanced nations like Japan, Australia and New Zealand — is to rebound to 6.8 percent, in part because it will be measured against a weak this year, Sawada said.
ADB expects a recovery to be L-shaped or swoosh-shaped, rather than V-shaped, which would leave next year’s GDP level below pre-coronavirus projections, implying that the recovery is only “partial” and “not full,” it said.
Virus containment “seems to be translated into growth performance,” and a prolonged pandemic remains the biggest downside risk this year and the next, he said.
US-China trade tensions and technology conflicts, as well as financial vulnerabilities amid the pandemic, weigh on growth, Sawada said.
Policies focused on protecting lives and livelihoods, and ensuring a safe return to work and restart of businesses, are crucial to ensuring a sustained recovery for the region, he said.
Additional reporting by AP
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