(Bloomberg) – Asia’s developing coronavirus-plagued economy will shrink for the first time since the early 1960s, with next year’s output level still below pre-pandemic projections, even as growth slows down restores, according to the Asian Development Bank.
The region’s gross domestic product will decline 0.7% in 2020, down from June’s projection of a 0.1% increase, the Manila-based bank said in a report on Tuesday. A contraction this year would be the first since 1962, Yasuyuki Sawada, the AfDB’s chief economist, said in a live briefing.
“The economic threat posed by the Covid-19 pandemic remains powerful, as prolonged first waves or recurring outbreaks could prompt new containment measures,” Sawada said. Slowdowns in developing countries in Asia are more prevalent than previous crises, with three-quarters of the region’s economies expected to shrink this year, he said.
China will reverse the trend and is expected to rise 1.8% this year – unchanged from June’s forecast – as successful public health measures provide a springboard for growth, according to the AfDB. Growth is expected to accelerate to 7.7% in 2021, from a previous forecast of 7.4%.
In India, where lockdowns have dampened private spending, GDP will decline 9% this year, down sharply from June’s forecast of -4%, AfDB said. There was also significant deterioration for the Philippines and Thailand, which are now expected to contract by 7.3% and 8% respectively.
Growth in developing Asia – a region that excludes advanced economies like Japan, Australia and New Zealand – will rebound to 6.8% in 2021, in part because it will be measured against a year 2020. weak, Sawada said. This will still leave next year’s GDP level below pre-coronavirus projections, implying that the recovery is only “partial” and “not complete.”
Containment of the virus “appears to translate into growth performance,” and a prolonged pandemic remains the biggest downside risk this year and next, he said.
Trade tensions between the United States and China, technological conflicts and financial vulnerabilities amid the pandemic are also weighing on growth, Sawada said.
Policies focused on protecting lives and livelihoods, as well as safely returning to work and restarting businesses, are essential to ensure a sustainable recovery in the region, he said.
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