Asia's emerging economies will contract in 2020, the first such recession in almost 60 years, the Asian Development Bank said in an update to its projections on Tuesday. The upgrade of the ADB 's forecast forecasts that this year the regional economy will contract 0.7 percent, returning to growth of 6.8 percent in 2021.
However, if the coronavirus pandemic worsens dramatically, things could deteriorate further, said the regional lender. The update downgrades growth forecasts for many countries in the area where, in certain countries, such as the Philippines and Indonesia, coronavirus outbreaks have risen.
China, where the pandemic originated, has already started to rebound and will see its economy rise 1.8 percent this year and 7.7 percent in 2021, the study said. The 6.1 percent rise in 2019 was the slowest rate in decades for China's economy. The status of Asia as a manufacturing center for many medical goods, automated technologies and optical instruments, the study observed, helped cushion the blow to trade from the pandemic decline.
The global recession, however, is the worst since before the early 1960s, the study said.
"This has enhanced efforts to bring hundreds of millions of people out of poverty in our country," ADB Chief Economist Yasuyuki Sawada said.
Border controls, lock downs and other restrictions have been imposed by government agencies in many countries to stop the spread of the coronavirus and prevent further outbreaks. Such initiatives, though, come at a tremendous economic expense.
Regional governments have pledged $3.6 trillion in grants , loans and other assistance for individuals and companies, equal to about 15 percent of regional economic output, to try to compensate. But small businesses that account for much of the region's industry are short of resources to deal with the crisis, the ADB said. It expects the recovery to be "L-shaped," rather than V-shaped, or "swoosh-shaped."
Even with a rebound, prior to COVID-19, economies would be "dramatically below estimates," Sawada said. The study said that a protracted pandemic could bring countries into debt crises or destabilize their financial markets. "Another danger will be to escalate geopolitical tensions, especially the potential to escalate US-PRC (China) conflict over trade and technology," it said.
Any of the worst damage from the pandemic has been seen in South and Southeast Asian nations, with Malaysia, the Philippines, Singapore , and Thailand reported double-digit contractions in the April-June quarter from a year ago. It is estimated that all of their economies will contract by 5% or more this year. In order to help their recovery, robust government investment would be key, the study said.
The ADB said that ensuring the development of health services is also essential for sustainable growth. "During the recession, physical and emotional well-being has taken a battering," said Donghyun Park, an ADB economist. "The first step to restoring the economy and culture is a sound mind and a sound body, of course."
The positive news is that the area is predicted to rebound next year, with a growth rate of 6.8%. China's economy is projected to recover by 7.7% in 2021, while India is also expected to rebound by 8% next year, according to ADB. But the bank warns that a rebound could be sparked by a protracted pandemic and stricter containment measures. "The economic threat faced by the COVID-19 pandemic remains potent, as prolonged first waves or repeated outbreaks could contribute to more containment measures," Sawada said.
References
ADB forecasts developing Asian economies in recession in '20. (2020, September 15). AP NEWS. https://apnews.com/article/philippines-asia-financial-markets-china-virus-outbreak-429fc74c1468df6391eab775bc9a8f30
Asia sees first regional recession in 60 years. (2020, September 15). Open Development Mekong. https://opendevelopmentmekong.net/en/news/asia-sees-first-regional-recession-in-60-years/
Asia sees first regional recession in 60 years. (2020, September 15). BBC News. https://www.bbc.com/news/business-54157000
(n.d.). Asian Development Bank. https://www.adb.org/sites/default/files/publication/156005/adbi-wp150.pdf
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