MANILA – The developing economies of the Asia-Pacific region will shrink by 0.7 percent in 2020, its first contraction in six decades, due to the crisis caused by the COVID-19 pandemic, but growth will resume next year, the Asian Development Bank (ADB) said on Tuesday.
About three-fourths of the region’s countries will end the year with negative growth, but the economy of the Asia-Pacific region as a whole will rebound by 6.8 percent in 2021, according to report by the ADB released on Tuesday that updates Asia-Pacific development outlook and revises its 2020 forecasts downward again.
“The economic threat posed by the COVID-19 pandemic remains potent, as extended first waves or recurring outbreaks could prompt further containment measures,” ADB Chief Economist Yasuyuki Sawada said.
“Consistent and coordinated steps to address the pandemic, with policy priorities focusing on protecting lives and livelihoods of people who are already most vulnerable, and ensuring the safe return to work and restart of business activities, will continue to be crucial to ensure the region’s eventual recovery is inclusive and sustainable,” he added.
The regional development bank, which is headquartered in Manila, pointed out that if the pandemic prolongs, the growth forecasts for the region for this year and the next would have to revised although it described the stimulus packages worth a total of $3.5 trillion – 15 percent of the gross domestic product of the Asia-Pacific – approved by different countries as positive.
Geopolitical tensions, the trade and technology war between China and the United States, and the vulnerability of the financial system can also worsen if the effects of the pandemic are not eased soon, with a strong impact on the economy, the ADB added.
China is one of the few economies in the region that has not slipped into recession and is expected to grow at 1.8 percent this year and 7.7 percent next year, due to the successful public health measures that contained the epidemic that broke out in the central Chinese city of Wuhan in January.
In India, the region’s second largest economy and the country with the second-largest number of COVID-19 cases in the world, the GDP has already contracted by 23.9 percent in the second quarter and is expected to shrink by 9 percent in 2020 although it will expand by 8 percent in 2021.
In the subregional calculations, East Asia – which includes China, Hong Kong, South Korea and Taiwan – will be the only one to post growth this year, of 1.3 percent, while South Asia will contract the most, by 6.8 percent, dragged down especially by India as well as Maldives, whose economy will plummet 20.5 percent owing to its heavy dependence on tourism.
The Pacific islands will contract by 6.1 percent in 2020 for the same reason and will be subregion that will struggle the most to rebound in 2021.
The Southeast Asian economy will shrink by 3.8 percent, with Thailand (-8 percent), Philippines (-7.3 percent), East Timor (-6.3 percent) Singapore (-6.2 percent) leading the losses, while Vietnam and Myanmar will weather the storm with a growth of 1.8 percent each.
The inflation forecast for developing Asia was revised downward to 2.9 percent this year – from a forecast of 3.2 percent in April – due to low oil prices and weak demand, and will decline further to 2.3 percent in 2021.
The ADB, created in 1966 to promote growth and economic cooperation in the Asia-Pacific region, has 68 member countries, 49 of them from the region, whom it assists with loans, subsidies, technical assistance and investments.