Developing Asia is now forecast to contract by 0.4 percent in 2020, less than the 0.7 percent contraction envisaged, said Asian Development Bank (ADB) in the latest report - Photo by ADB

JAKARTA (TheInsiderStories) – Developing Asia is now forecast to contract by 0.4 percent in 2020, less than the 0.7 percent contraction envisaged, said Asian Development Bank (ADB) in the latest report.  While growth in 2021 is forecast to rebound to 6.8 percent. But prospects are diverging within the region, with East Asia set to grow this year while other subregions are contracting.

“A prolonged pandemic remains the primary risk, but recent developments of the vaccine front are tempering this. Safe effective and timely vaccine delivery in developing economies will be critical support the reopening of economies and the recovery of growth in the region,” said the ADB’ chief economist, Yasuyuki Sawada, in an official statement released on Thursday (10/12).

He continued, the prospects are diverging within the region. East Asia’ growth forecast for 2020 is upgraded from 1.3 percent to 1.6 percent, reflecting faster-than-expected recovery in the China and Taipei. South Asia will contract by 6.1 percent this year, upgraded from an earlier at 6.8 percent contraction. India is recovering more rapidly than expected.

Contraction in Southeast Asia has been revised down from 3.8 percent to 4.4 percent. Central Asia is still projected to contract by 2.1 percent in 2020, and the Pacific economies by 6.1 percent as global tourism continues to languish.  Depressed demand and low oil prices will keep inflation in check, at 2.8 percent in 2020 and 1.9 percent in 2021.

Growth in South Asia is forecast to rebound to 7.2 percent in 2021. The growth forecast for India, the subregion’ largest economy, for fiscal year 2020 is raised to -8.0 percent, from the -9.0 percent projection in September, while outlook for 2021 is kept at 8.0 percent.

Economic growth in Southeast Asia remains under pressure as COVID-19 outbreaks and containment measures continue, particularly in Indonesia, Malaysia, and the Philippines. The subregion’ growth forecast for 2020 is revised down to -4.4 percent from -3.8 percent in September.

And, the outlook for 2021 is also downgraded, with Southeast Asia now expected to grow 5.2 percent next year compared to the 5.5 percent growth forecast in September. The outlook for the Pacific is unchanged for both 2020 and 2021 at -6.1 percent and 1.3 percent, respectively.

Central Asia’ growth forecast for 2020 remains at -2.1 percent, but outlook for 2021 is slightly downgraded to 3.8 percent from the 3.9 percent growth projection in September. Sawada stated, the outlook for developing Asia is showing improvement and the growth projections have been upgraded for the People’ Republic of China and India, the region’ two largest economies.

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 in recent months. A recovery in tourism, however, is likely to be delayed.

Regional inflation is expected to marginally ease to 2.8 percent in 2020, from the 2.9 percent projected in September, due to depressed demand and low oil prices. Inflation for 2021 is forecast at 1.9 percent, down from 2.3 percent forecast in September. Oil prices are retained at US$42.50 per barrel in 2020 before increasing to $50.00 per barrel in 2021.

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