So-called ‘Developing Asia’ – the 45 economies in Asia-Pacific outside of Japan – is now expected to contract 0.7% this year, the Asian Development Bank forecast yesterday instead of enjoying a sluggish but positive year of growth.
The ADB’s previous estimate in June had forecast on 0.1% growth. If growth slows this year it would be the first negative annual negative outcome for the region since 1962.
But the bank then expects a rapid rebound in 2021 with growth across the region forecast to recover and grow 6.8%. But that will still be below pre-COVID-19 predictions. But it is a bit stronger than the earlier 6.2% forecast.
But the ripples from COVID-19, especially in travel and tourism will continue to threaten the strength of 2021’s recovery.
The region is Australia’s biggest trading group – China, of course, is our major trading partner, but so is South Korea, Taiwan, and Southeast Asia – Thailand, Singapore, and Indonesia.
The update of its Asian Development Outlook report reveals the damage wrought by the pandemic has been greater than previously thought, with about three-quarters of the region’s economies forecast to slump this year.
“Most economies in the Asia and Pacific region can expect difficult growth path for the rest of 2020,” ADB Chief Economist Yasuyuki Sawada said in a statement.
“The economic threat posed by the COVID-19 pandemic remains potent, as extended first waves or recurring outbreaks could prompt further containment measures,” Sawada said.
But while the pandemic remains the biggest downside risk to the region’s outlook, Sawada also pointed to the “worsening geopolitical tensions” including the trade and tech wars between US and China as being capable of damaging growth in 2021.
China remains the exception in the region (as we saw in the last round of data for August, released yesterday – see separate story). The ADB has maintained China’s 2020 GDP growth forecast at an annual 1.8%, with a rebound to 7.7% next year, which would take annual growth well above the levels of the last three years.
China’s rival, India is looking at a nasty 9% slide in economic growth this year, more than double the 4% contraction in the June forecast.
India is also expected to bounce back with 8.0% growth next year, but that will leave it further behind China.
Across Southeast Asia, the ADB forecasts a 3.8% slump this year, before picking up next year to grow an estimated 5.5%.
The ADB says depressed demand and low oil prices will offset supply disruptions, keeping regional inflation at 2.9% in 2020, and trimming it to 2.3% in 2021.
