Negative surprises, primarily in India, and rising social unrest behind IMF’s reduced economic growth forecasts.
Developing Asia is on course to contract this year, but probably less than previously thought as China’s economy enjoys a faster than expected recovery, the Asian Development Bank (ADB) said on Thursday.
Economic growth in developing Asia, a group of 45 nations in the Asia-Pacific, is expected to shrink 0.4 percent this year, the ADB said in an update to September’s Asian Development Outlook report, short of its earlier estimate for a 0.7 percent decline. For 2021, the region is forecast to grow 6.8 percent, the bank said.
This year’s expected decline – the result of lockdowns imposed to tackle COVID-19 – would be the region’s first in nearly six decades. The ADB said the prolonged pandemic, which has infected nearly 68 million people and killed more than 1.5 million, remains a risk.
Developing Asia’s subregions are forecast to contract this year, except for East Asia, which is expected to grow 1.6 percent, higher than earlier projected thanks to faster-than-expected recoveries in China and Taiwan.
China, where the coronavirus first emerged a year ago, is projected to grow 2.1 percent this year, faster than the ADB’s September estimate of 1.8 percent. The ADB kept its 7.7 percent growth forecast for the world’s second-largest economy for 2021.
“A prolonged pandemic remains the primary risk, but recent developments on the vaccine front are tempering this,” said ADB Chief Economist Yasuyuki Sawada.
In recent weeks, experimental vaccines developed by Pfizer-BioNTech and Moderna have shown efficacy of 95 percent in late-stage trials, while the AstraZeneca-Oxford University inoculation has also shown promising results.
Economic threat remains potent
The ADB still expected India’s economy to bounce back with growth of 8.0 percent next year, emerging from a projected contraction of 8.0 percent this year, less than the 9.0 percent decline previously forecast.
Southeast Asia remains under pressure, as virus outbreaks and restrictions continue in countries such as Indonesia, Malaysia, and the Philippines, prompting the ADB to downgrade its 2020 and 2021 growth forecasts.
Southeast Asia faces a bleaker outlook with this year’s economic output seen to suffer a deeper slump of 4.4 percent, before growing 5.2 percent next year. The bank earlier forecast growth in Southeast Asia at 5.5 percent.
Regional inflation this year is expected to ease marginally to 2.8 percent from a previous estimate of 2.9 percent and slow further to 1.9 percent in 2021.