The economies of developing Asian countries are expected to cumulatively experience a contraction of 0.7% in 2020. This would represent the first decline in the region’s collective economic fortunes since 1962.
According to the Asian Development Bank (ADB), the region which consists of 45 countries across the Asia-Pacific region has had its predicted economic growth level for the year revised from a prior forecast of a growth of 0.1%. This forecast had been made in June.
As many would expect, the primary cause of this economic decline was the ongoing Covid-19 pandemic. Approximately three-quarters of all countries in the Asia-Pacific growth are expected to suffer an economic contraction over the course of the year. This fact served as evidence that the economic damage caused by the pandemic was beyond the scope of what many had initially expected.
In a statement, ADB Chief Economist Yasuyuki Sawada said that “(most) economies in the Asia and Pacific region can expect (a) difficult growth path for the rest of 2020”.
Sawada also said, “The economic threat posed by the Covid-19 pandemic remains potent as extended first waves or recurring outbreaks could prompt further containment measures.”
The economies which are expected to take the most severe hits are those of India as well as Southeast Asian countries. The economy of India is expected to contract by 9% over the course of the year. This figure has been revised from its previous expected annual contraction rate of 4%. However, India’s economy is also forecast to recover well; a growth rate of 8% is expected in 2021.
Southeast Asian economies have also been predicted to suffer greatly. The region is expected to suffer an economic contraction of 3.8% in 2020. However, just as is the case with India, economic recovery in 2021 is generally expected across Southeast Asia.
However, the economies of developing Asian countries are expected to recover rapidly. These economies are expected to collectively grow by 6.8% in 2021, according to the ADB’s Asian Development Outlook report. Sawada mentioned that such a recovery would likely take the form of a protracted L-shaped recovery.
Another factor which is expected to have a significant impact on the economic fortunes of developing Asia is the ongoing trade and technological war between the United States and China. Tensions between the two superpowers could cause the economic growth of the region to be hindered.
The ADB also mentioned that the inflation rate of the region is expected to remain stable at 2.9%. This stability is likely to be caused by a reduction in oil prices as well as a decrease in demand. The region’s inflation rate is then expected to fall to 2.3% in 2021.
15th September 2020 16:42