The coronavirus pandemic will cause economic output in “developing Asia” to shrink for the first time in nearly six decades in 2020 before it bounces back next year, the Asian Development Bank said on Tuesday.
“Developing Asia”, which groups 45 countries in Asia-Pacific, is expected to contract 0.7% this year, the ADB said, forecasting the first negative quarterly figure since 1962. The ADB’s previous forecast in June had reckoned on 0.1% growth.
For 2021, the region is forecast to recover and grow 6.8%, still below pre-COVID-19 predictions, the ADB said in an update of its Asian Development Outlook report.
The updated forecasts show the damage brought by the pandemic was greater than previously thought, with about three-quarters of the region’s economies forecast to slump this year.
“Most economies in the Asia and Pacific region can expect difficult growth path for the rest of 2020,” ADB Chief Economist Yasuyuki Sawada said in a statement.
“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.
While the pandemic remains the biggest downside risk to the region’s outlook, Sawada said in a separate media briefing “worsening geopolitical tensions” that include the trade and tech war between U.S. and Beijing, could also dent growth.
China, where the coronavirus surfaced in December, is seen bucking the trend as the ADB kept its 2020 growth forecast at 1.8%. The world’s second largest economy is expected to rebound strongly to 7.7% in 2021, the ADB said.
India’s economy is expected to contract 9.0% this year, ADB said, a far worse outcome than the 4.0% contraction previously forecast, ADB said. But it also expected India to bounce back with 8.0% growth next year.
As the pandemic took a toll on Southeast Asian economies, the sub-region is projected to suffer a 3.8% slump this year, before picking up next year.
Latest forecasts suggest a more protracted “L” shaped recovery for “developing Asia”, Sawada said.
Depressed demand and lower oil prices allowed the ADB to keep its inflation forecast for developing Asia at 2.9%, and it is predicted to slow further to 2.3% in 2021.