Developing Asia will barely grow in 2020 as measures to tackle the COVID-19 pandemic hamper economic activity and weaken external demand, according to a new set of forecasts from the Asian Development Bank (ADB), which has projected a growth of 0.1 per cent for the region in 2020—down from April’s 2.2 per cent forecast and the slowest for the region since 1961.
Hit hard by COVID-19, South Asia is forecast to contract by 3 per cent in 2020, compared to 4.1 per cent growth predicted in April. Growth prospects for 2021 are revised down to 4.9 per cent from 6 per cent. India’s economy is forecast to contract by 4 per cent in fiscal 2020-2021, before growing by 5 per cent in 2021-22, ADB said.
In a regular supplement to its annual flagship economic publication, the Asian Development Outlook (ADO) 2020 released in April, ADB said growth in 2021 is expected to rise to 6.2 per cent, as forecast in April. Gross domestic product (GDP) levels in 2021 will remain below what had been envisioned and below pre-crisis trends.
Excluding the newly industrialised economies of Hong Kong, South Korea, Singapore and Taiwan, developing Asia is forecast to grow 0.4 per cent this year and 6.6 per cent in 2021.
“While we see a higher growth outlook for the region in 2021, this is mainly due to weak numbers this year, and this will not be a V-shaped recovery. Governments should undertake policy measures to reduce the negative impact of COVID-19 and ensure that no further waves of outbreaks occur,” said ADB chief economist Yasuyuki Sawada.
Risks to the outlook remain on the downside. The COVID-19 pandemic may see multiple waves of outbreaks in the coming period and sovereign debt and financial crises cannot be ruled out. There is also the risk of renewed escalation in trade tensions between the United States and China, ADB said in a press release.
East Asia is forecast to grow at 1.3 per cent in 2020—the only sub-region to experience growth this year—while growth in 2021 will recover to 6.8 per cent. Growth in China is forecast at 1.8 per cent this year and 7.4 per cent in 2021, compared to the April estimates of 2.3 per cent and 7.3 per cent respectively.
Economic activity in Southeast Asia is expected to contract by 2.7% this year before growing by 5.2% in 2021. Contractions are forecast in key economies as containment measures affect domestic consumption and investment, including Indonesia (-1.0%), the Philippines (-3.8%), and Thailand (-6.5%). Viet Nam is forecast to grow 4.1% in 2020. While that is 0.7 percentage points lower than ADB’s April estimates, it is the fastest growth expected in Southeast Asia.
Central Asia’s economic activity is expected to contract by 0.5% compared to the 2.8% growth forecast in April due to trade disruptions and low oil prices. Growth is forecast to recover to 4.2% in 2021.
Restricted trade flows and declining tourism numbers have dampened economic outlook for the Pacific subregion. The subregional economy is forecast to contract by 4.3% in 2020 before rising to 1.6% growth in 2021.
Inflation for developing Asia is forecast at 2.9% in 2020, down from a forecast of 3.2% in April, reflecting depressed demand and lower oil prices. In 2021, inflation is expected to ease to 2.4%.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.