Coronavirus-ravaged economies across the Asia Pacific will make a "swoosh-shaped" recovery next year, the Asian Development Bank forecast Tuesday, but it warned that further restrictions to combat the contagion could derail the region's return to growth.
Developing Asia — stretching from the Cook Islands in the Pacific to Kazakhstan in Central Asia — is expected to contract in 2020 for the first time in nearly six decades, throwing tens of millions of people into poverty, the Philippines-based lender said.
The 0.7 percent shrink in gross domestic product compares with the bank’s previous estimate in June for 0.1 percent growth and will mark “the first regional GDP contraction since the early 1960s”, it said.
“The downturn is across the board, with almost three-fourths of regional economies projected to contract — the largest such share in the past 6 decades,” the bank said in the latest update to its outlook.
While the vast region is expected to bounce back next year, with GDP projected to grow 6.8 percent, it will be “substantially smaller” than forecast before Covid-19 struck.
“Thus, the regional recovery will be L-shaped or ‘swoosh-shaped’ rather than V-shaped,” the bank said, noting a prolonged pandemic was the main threat to the outlook.
The bank warned that reimposing tough virus restrictions could hamper the recovery and even trigger “financial turmoil”.
“While economies in developing Asia remain resilient, continued policy support is needed to underpin recovery,” ADB chief economist Yasuyuki Sawada said.
Policy support packages announced to the end of August had reached a total of $3.6 trillion — about 15 percent of regional GDP, the bank said.
China, where the virus first emerged late last year before morphing into a pandemic that has infected more than 29 million people worldwide, was one of the few economies to buck the downward trend in the region.
After successfully beating back the disease, the world’s second largest economy is forecast to grow 1.8 percent this year and 7.7 percent in 2021, the bank said.
In contrast, India, which is one of the hardest hit countries in the world with over 4.8 million infections despite lengthy lockdowns, is expected to shrivel by nine percent in 2020 before expanding by eight percent next year.
“The path and speed of economic recovery in regional economies will depend on many different factors, the most important of which is ability to control and contain the pandemic,” the ADB said.
As regional economies contract this year the number of poor people will likely rise by at least 78 million, reversing a reduction in poverty over the past three to four years, according to the report.
Inflation however is expected to remain “muted” owing to depressed demand and lower oil prices, it said.
Another relative bright spot was trade. While the region’s exports had contracted, they had fared better than the rest of the world thanks to stronger demand for Covid-related health supplies and electronics.