Asian developing economies set to shrink for first time in six decades
Asia’s developing economies will contract this year for the first time in six decades as the Covid-19 pandemic takes a toll on a crucial driver of global growth, according to the Asian Development Bank.
The ADB said in a new report that developing economies across Asia would on average show negative GDP growth of 0.7 per cent this year. “This will be the first regional contraction since the early 1960s,” Yasuyuki Sawada, the bank’s chief economist said ahead of the report’s launch. Mr Sawada said that the fall would be the sharpest since 1961, when regional growth contracted by 8 per cent.
The Manila-based development bank forecast that the economies would rebound in 2021, growing on average by 6.8 per cent. But it noted that this would still be below its pre-Covid-19 projections — implying a partial rather than a full recovery.
It said a prolonged pandemic that would require renewed lockdowns could “derail the recovery”, and was the biggest risk to the region’s growth this year and in 2021.
“Protracted weakness could trigger crises in some economies,” Mr Sawada said. “Worsening geopolitical tensions are another risk.”
The bank said that China, where the virus was first detected in the central city of Wuhan, was one of the few economies in the region bucking the downturn. It forecast China would grow by 1.8 per cent this year and 7.7 per cent in 2021, with “successful public health measures providing a platform for growth”.
However India, which has the highest number of coronavirus cases after the US and where lockdown measures have depressed economic output, is forecast to shrink by 9 per cent this year. The bank said that India’s economy was expected to grow by 8 per cent in 2021.
The ADB’s previous forecast in June had tipped developing Asian countries to grow by an average of 0.1 per cent this year, before rebounding to 6.2 per cent growth in 2021.
The bank described the downturn as “broad-based”, saying that it expected three-quarters of the region’s economies to post negative growth this year.
The ADB said that depressed demand and low oil prices would help keep regional inflation low at 2.9 per cent this year, and trim it to 2.3 per cent in 2021.
The bank added that governments in the region had spent $3.6tn on policy measures in response to the pandemic, equivalent to 15 per cent of regional GDP, and primarily in the form of income support.