The Asian Development Bank has trimmed its 2021 economic growth forecast for developing Asia as the Covid pandemic continues to dominate the region’s outlook, with the emergence of the Delta variant, uneven vaccine rollouts and renewed lockdowns throwing up roadblocks to recovery.
The Manila-based multilateral bank said Wednesday that it now expects developing Asia’s gross domestic product growth at 7.1%, down from the 7.3% it predicted in April. The area contracted 0.1% in Covid ravaged 2020.
The growth outlook for 2022 was however raised to 5.4% from 5.3%.
The region includes China, South Korea, India, Singapore and other countries across South, East and Central Asia, as well as the Pacific. It excludes Japan, Australia and New Zealand.
It is Australia’s growth backyard and with the slide in iron ore prices, our export performance in many markets will depend on the growth of the various economies.
Since the ADB published its last forecasts in April, parts of Asia have been hit by surges of Covid’s contagious Delta variant.
The bank continues to expect South and East Asia to be the main engines of growth, largely due to powerhouses India and China. India has been battered by Covid but the ADB still forecasts double-digit growth for the country this year, though at 10.0% versus 11.0% previously.
China’s growth view has been left steady at 8.1%, with the ADB expecting the country not to be hurt by the sporadic outbreaks of Delta or the problems at Evergrande, the indebted property group. But GDP is still forecast to slow to a 5.5% annual rate in 2022.
“The recovery in global demand for exports from developing Asia, supported by robust growth in advanced economies, will continue to benefit the region’s export-oriented economies,” the ADB said.
ADB noted that growth in the largest economies accelerated in the first half of the year from the preceding six months, particularly in countries like Singapore and China, which quickly rolled out vaccines and reined in outbreaks.
That allowed them to avoid reimposing lockdowns and tap the rebound in global demand. Places like Thailand that were slower to vaccinate have been held back by fresh waves of infections, as has Vietnam.
ADB’s growth forecast for Malaysia, which reimposed mobility restrictions several times this year to curb outbreaks, was cut to 4.7% from 6.0%, while Thailand’s was slashed to 0.8% from 3.0%.
Southeast Asia’s growth projections for 2021 and 2022 have been lowered to 3.1% and 5.0%, respectively, from forecasts of 4.4% and 5.1% in April.
The Pacific’s economy is set to contract 0.6% this year, compared with 1.4% growth projected in April, before expanding by 4.8% in 2022 in a solid bounce back.
“Developing Asia’s progress on vaccination remains uneven and lags behind the rollout in advanced economies,” the ADB said, noting that as of the end of August, 28.7% of the population had been fully vaccinated, compared with 51.8% in the U.S. and 58.0% in the European Union.
Rising inflation remains a key focal point, particularly in the face of surging global commodity prices, but the bank thinks it remains largely in check and close to the targets of most central banks in the region.
It expects inflation in developing Asia to remain moderate at 2.2% this year before accelerating to 2.7% in 2022. That compares with the 2.3% figure the bank projected in its April outlook.
ADB believes the region’s recovery should continue to be supported by expansionary fiscal and monetary policies, saying that most central banks have refrained from raising policy rates after cutting them in 2020.
