- The new 0.4% growth forecast for 2020 is less than the 0.7% contraction envisaged in September
- The outlook for 2021 remains unchanged
- Prospects are divergent, with East Asia set to grow this year while other subregions are contracting
- Growth projections have been upgraded for China and India, the region’s two largest economies
Developing Asia’s economy will contract by 0.4% this year, before picking up to 6.8% in 2021, but prospects diverge within the region, according to a new Asian Development Bank (ADB) report.
The new 0.4% growth forecast is less than the 0.7% contraction envisaged in the “Asian Development Outlook 2020 Update,” ADB said in a December 10 regular supplement to the update released in September.
The improvement in forecast comes as the region moves toward recovery from the effects of the COVID-19 pandemic. The outlook for 2021 remains unchanged.
Pandemic-induced lockdowns and restrictions have been eased in varying levels in the region, with merchandise exports rebounding quickly from substantial declines in the second quarter. Mobility is also returning to pre-COVID-19 levels in East Asia and the Pacific, where the spread of COVID-19 has largely been contained or prevented recently. A recovery in tourism, however, is likely to be delayed.
“The outlook for developing Asia is showing improvement. Growth projections have been upgraded for the People’s Republic of China (PRC) and India, the region’s two largest economies,” said ADB chief economist Yasuyuki Sawada.
But prospects are diverging within the region, with East Asia set to grow this year while other subregions are contracting.
East Asia’s growth forecast is upgraded to 1.6% for 2020 from 1.3% on the back of faster-than-expected recoveries in China and Taiwan. Growth outlook for 2021 is maintained at 7.0%.
South Asia’s gross domestic product growth (GDP) will contract by 6.1% in 2020, revised up from the 6.8% contraction expected in September. Growth in South Asia is forecast to rebound to 7.2% in 2021. The growth forecast for India, the subregion’s largest economy, is raised to -8.0% for this year, from the -9.0% projection in September. Outlook for 2021 is kept at 8.0%.
Recovery in Southeast Asia continues to lag as virus containment efforts in the larger economies, particularly in Indonesia, Malaysia, and the Philippines, hamper economic activity. Subregional forecasts are downgraded for 2020 from 3.8% contraction to -4.4%, and for 2021 from 5.5% growth to 5.2%.
The outlook for the Pacific is unchanged for both 2020 and 2021 at -6.1% and 1.3%, respectively. Central Asia’s growth forecast for 2020 remains at -2.1%, but outlook for 2021 is slightly downgraded to 3.8% from the 3.9% growth projection in September.
Sawada said a prolonged pandemic remains the primary risk to the outlook, but added that recent developments on the vaccine front are tempering the risk.