MANILA－Developing economies in Asia, stretching from the Cook Islands in the Pacific to Kazakhstan in Central Asia, will contract in 2020, the first such downturn in nearly 60 years, the Asian Development Bank said on Tuesday in an update to its forecasts.
The update of the ADB’s outlook estimates the regional economy will contract 0.7 percent this year, recovering to 6.8 percent growth in 2021.
Conditions could deteriorate further, however, if the coronavirus pandemic worsens significantly, the regional lender said.
The update downgrades growth estimates for many regional countries, where outbreaks of coronavirus have surged in some countries, such as the Philippines and Indonesia.
The report said that China has already begun to recover and will see its economy grow 1.8 percent this year and 7.7 percent in 2021. The 6.1 percent growth for China’s economy in 2019 was the slowest pace in decades.
Asia’s status as a production base for many medical products, digital devices and optical equipment helped to cushion the blow to trade from the pandemic downturn, the report said.
Nonetheless, the downturn is the worst since the early 1960s, the report added.
“This has set back efforts to lift hundreds of millions of people in our region out of poverty,” said the ADB’s chief economist, Yasuyuki Sawada.
Governments in many countries have imposed border controls, lockdowns and other restrictions to stem the spread of the coronavirus and prevent more outbreaks. But such measures come at a huge economic cost.
To help compensate, regional governments have promised $3.6 trillion, equivalent to about 15 percent of regional economic activity, in subsidies, loans and other support for individuals and businesses.
But small companies that account for most business in the region are short of capital to weather the crisis, the ADB said. It expects a recovery to be “L-shaped”, or “swoosh-shaped”, rather than V-shaped.
Even with a recovery, economies will be “substantially below expectations before COVID-19”, Sawada said.
A prolonged pandemic could put countries into debt crises or destabilize their financial markets, the report said.
“Another risk would be worsening geopolitical tensions, most notably potential for US-PRC (China) friction over trade and technology to intensify,” it said.
South and Southeast Asian countries have seen some of the worst devastation from the pandemic, with Malaysia, the Philippines, Singapore and Thailand logging double-digit contractions in the April-June quarter from a year earlier. All of those economies are expected to shrink by 5 percent or more this year.
Strong government spending will be crucial to support their recoveries, the report said.
Agencies Via Xinhua