SINGAPORE (ICIS)--Economic prospects in developing Asia have worsened amid a revival of coronavirus cases in some areas, with regional GDP expected to contract by 0.7% this year, the Asian Development Bank (ADB) said on Tuesday.
The contraction marks the first regional recession in nearly six decades, it said in a report. The ADB previously projected the region’s economy to grow by 0.1% this year.
ADB’s list of developing countries consists of 45 countries in the Asia-Pacific.
The region’s GDP is projected to grow by 6.8% in 2021, but this will still leave it substantially below expectations before the coronavirus pandemic, the ADB said.
“The threat of a prolonged pandemic is the main risk to the outlook. A return to more stringent containment measures could slow or even derail recovery and possibly trigger financial turmoil,” said Yasuyuki Sawada, ADB’s chief economist.
Excluding high-income newly industrialised economies, regional GDP is expected to also contract by 0.5% in 2020 before growing by 7.2% next year.
The coronavirus pandemic is at varying stages in the region, with daily cases rising in some regional economies, flattening or subsiding in others, and reviving in still others in second or third waves.
Containment measures have been eased in most economies across developing Asia and are now less strict than in the second quarter of 2020.
Economic growth in developing Asia collapsed in the second quarter, with several regional economies recording quarterly contraction for the first time since the Asian financial crisis of 1997-1998.
“Signs of bottoming out have appeared as leading economic indicators improved, though they remain below pre-pandemic readings in most economies,” the ADB noted, adding that consumer and investor confidence remains suppressed across the region.
In China, GDP growth in the second half of 2020 is expected to accelerate further from 3.2% in the second quarter, supported by fiscal policy measures especially in infrastructure investment.
While the service sector is expected to recover further, lacklustre domestic household consumption and external headwinds will continue to weigh on China’s recovery.
China’s GDP is now forecast to grow by 1.8% in 2020, revised down from an earlier growth projection 2.3% before rebounding to 7.7% in 2021.
The country’s external trade is expected to remain lacklustre in the remainder of 2020, with merchandise exports underperforming last year.
In India, economic activity is unlikely to resume fully within the remaining three quarters of the country’s financial year which ends in March 2021.
India’s economy is expected to contract by 9.0% in the year ending 31 March 2021, with year-on-year growth projected to remain negative in the next two or possibly three quarters.
Economic activity may start to resume more fully from early fiscal year 2021 starting from April next year, with growth expected to rebound, albeit gradually, to 8.0%.
The coronavirus is spreading rapidly in India, with confirmed cases surpassing 4m in early September, and the virus has penetrated deep into rural areas. Many states and districts have implemented local lockdowns, and the resumption of economic activity has been slow.
With local lockdowns and risk-averse consumers, private consumption may continue to languish while investment is expected to continue contracting as investors are deterred by heightened risk and declines in public capital expenditure.
Photo: The global pandemic has heavily impacted the economies in many countries for most of 2020. (By ALEX PLAVEVSKI/EPA-EFE/Shutterstock)