Developing Asia growth outlook revised lower on virus concerns – ADB

SINGAPORE (ICIS)–The Asian Development Bank (ADB) on Wednesday lowered its 2021 economic growth outlook for developing Asia, amid continuing concerns over the COVID-19 pandemic.

ADB forecasts growth of 7.1% this year, with the outlook for 2022 raised to 5.4% from 5.3%, according to an update of its flagship economic publication, Asian Development Outlook (ADO) 2021.

The revised growth outlook for 2021 compares with a projection of 7.3% in April.

New COVID-19 variants, renewed local outbreaks, the reinstatement of various levels of restrictions and lockdowns, and slow and uneven vaccine rollouts are weighing down the region’s prospects.

“Developing Asia remains vulnerable to the COVID-19 pandemic, as new variants spark outbreaks, leading to renewed restrictions on mobility in some economies,” said ADB acting chief economist Joseph Zveglich, Jr.

“Policy measures should not only focus on containment and vaccination, but also on continuing support to firms and households and reorienting sectors in the economy to adapt to a ‘new normal’ once the pandemic subsides to kickstart the recovery.”

COVID-19 cases in developing Asia have risen since the Delta variant of the virus emerged in April.

New daily cases peaked at 430,000 in May.

More than 163,000 new daily cases were recorded on 31 August.

Meanwhile, vaccination progress in developing Asia remain uneven and lag behind those of advanced economies.

As of 31 August, 28.7% of the region’s population had full vaccine protection, compared with 51.8% coverage in the US and 58.0% in the EU.

The recovery path within the region remains uneven.

East Asia’s growth forecast for this year has been raised to 7.6% from 7.4% in April, as a surge in global demand fuels exports from the region.

Growth projections for China, the region’s largest economy, remain at 8.1% in 2021 and 5.5% in 2022.

“Growth in China is projected to remain close to its pre-pandemic path and commodity exporters are benefitting from high export prices and strong global demand for goods,” the Organization for Economic Co-operation and Development (OECD) said in a report on 21 September.

“However, household real incomes have been hit by higher energy and food prices, and risks of further virus outbreaks remain high in many countries where vaccination rates are low,” it said.

ADB expects economic growth of 8.8% in South Asia this year, compared with the 9.5% forecast in April for the subregion.

However, the outlook for 2022 has improved to 7.0% from 6.6%.

The projection for India – the subregion’s largest economy – is downgraded to 10.0% from 11.0% in 2021, while the outlook for next year has improved to 7.5% from 7.0%.

The forecasts for Southeast Asia and the Pacific have also been revised downward, as economies in these subregions continue to grapple with new virus variants, continued lockdowns and restrictions, and slow vaccine rollouts.

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.

Inflation in developing Asia is expected to remain in check, at 2.2% this year and 2.7% in 2022.

“The current trend of higher international commodity and food prices could stoke inflation in some of the region’s economies,” the ADB said.

ADB Growth Forecasts

	2016	2017	2018	2019	2020	2021		2022
						April Forecast	Update	April Forecast	Update
East Asia	6.1	6.3	6.1	5.3	1.8	7.4	7.6	5.1	5.1
Hong Kong, China	2.2	3.8	2.8	-1.7	-6.1	4.6	6.2	4.5	3.4
Mongolia	1.2	5.3	7.2	5.2	-5.3	4.8	4.6	5.7	6
China	6.8	6.9	6.7	6	2.3	8.1	8.1	5.5	5.5
Republic of Korea	2.9	3.2	2.9	2.2	-0.9	3.5	4	3.1	3.1
South Asia	7.6	6.6	6.4	4.2	-5.6	9.5	8.8	6.6	7
Afghanistan	2.2	2.7	1.2	3.9	-1.9	3	…	4	…
Bangladesh	7.1	7.3	7.9	8.2	3.5	6.8	5.5	7.2	6.8
Bhutan	7.4	6.3	3.8	4.3	0.9	-3.4	-3.4	3.7	3.7
India	8.3	6.8	6.5	4	-7.3	11	10	7	7.5
Maldives	6.3	7.2	8.1	7	-32	13.1	18	14	15
Nepal	0.4	9	7.6	6.7	-2.1	3.1	2.3	5.1	4.1
Pakistan	4.6	5.2	5.5	2.1	-0.5	2	3.9	4	4
Sri Lanka	4.5	3.6	3.3	2.3	-3.6	4.1	3.4	3.6	3.4
Southeast Asia	4.9	5.4	5.1	4.5	-4	4.4	3.1	5.1	5
Brunei	-2.5	1.3	0.1	3.9	1.2	2.5	1.8	3	3.5
Cambodia	7	6.9	7.5	7.1	-3.1	4	1.9	5.5	5.5
Indonesia	5	5.1	5.2	5	-2.1	4.5	3.5	5	4.8
Lao PDR	7	6.9	6.2	4.7	-0.5	4	2.3	4.5	4
Malaysia	4.4	5.8	4.8	4.4	-5.6	6	4.7	5.7	6.1
Myanmar	5.9	5.8	6.4	6.8	3.3	-9.8	-18.4	…	…
Philippines	7.1	6.9	6.3	6.1	-9.6	4.5	4.5	5.5	5.5
Singapore	3.3	4.5	3.5	1.3	-5.4	6	6.5	4.1	4.1
Thailand	3.4	4.2	4.2	2.3	-6.1	3	0.8	4.5	3.9
Timor-Leste	3.4	-4.1	-1.1	1.8	-8.5	3.4	2.2	4.3	4
Vietnam	6.2	6.8	7.1	7	2.9	6.7	3.8	7	6.5
Developing Asia	6.1	6.2	6	5	-0.1	7.3	7.1	5.3	5.4

Focus article by Nurluqman Suratman