MANILA, Philippines — The coronavirus pandemic will cause economic output in “developing Asia” to shrink for the first time in nearly six decades in 2020 before it makes a “swoosh-shaped’’ recovery next year, Asian Development Bank (ADB) said on Tuesday.
“Developing Asia,” which groups 45 countries in the Asia-Pacific region, is expected to contract 0.7 percent this year, ADB said, forecasting the first negative quarterly figure since 1962. Its forecast in June had reckoned on 0.1 percent growth.
The downturn cuts across the board, “with almost three-fourths of regional economies projected to contract,’’ the bank said in the latest update to its outlook.
“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.
Geopolitical tensions
While the pandemic remains the biggest downside risk to the region’s outlook, Sawada said in a separate media briefing “worsening geopolitical tensions” that include the trade and tech war between the United States and China, could also dent growth.
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 9 percent in 2020 before expanding by 8 percent next year.
As the pandemic took a toll on Southeast Asian economies, the subregion is projected to suffer a 3.8-percent slump this year, before picking up next year.
‘L-shaped recovery’
“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,” ADB said.
For 2021, the region is forecast to recover and grow 6.8 percent, still below pre-COVID-19 predictions, ADB said in an update of its Asian Development Outlook report.
The updated forecasts show the damage brought by the pandemic was greater than previously thought, with about three-quarters of the region’s economies forecast to slump this year.
“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,” Sawada 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 ‘muted’
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.
Sustainable dev’t goals
The pandemic has wiped out progress on lofty goals such as ending world poverty and hunger in the next decade, but the economic damage of COVID-19 shows how badly such global development is needed, philanthropist Bill Gates said.
Across the world, the virus has deepened social and economic inequality in areas like education, pay and health-care access, Gates said in remarks accompanying Monday’s release of a global development report by the Bill & Melinda Gates Foundation.
The report outlines ways in which COVID-19 has wreaked economic damage and derailed progress on many of the global development goals adopted by the United Nations five years ago.
“The COVID-19 pandemic not only stopped progress, it kicked it backward,” said Gates, who co-founded Microsoft Corp., in a conference call with reporters.
He and his wife, Melinda, set up the philanthropic foundation in 2000. United Nations members unanimously passed 17 Sustainable Development Goals, known as SDGs, in 2015, that read like a blueprint of ambitious tasks from ending hunger and gender inequality to expanding access to education and health care. The goals had a deadline of 2030.
Inequity made worse
“The SDGs represent the values that we have for humanity as a whole,” Gates said. “The importance of the goals if anything is reinforced by the pandemic,” he said. “After all, the pandemic has in almost every dimension made inequity worse.”
The number of people living in extreme poverty had been dropping for two decades, but the coronavirus crisis has pushed nearly 37 million more into the category, the report said.
—Reports from Reuters, AFP and Thomson Reuters Foundation