Coronavirus expected to slow growth in some Asian economies
Developing economies in Asia are likely to experience slower-than-expected growth due to protracted coronavirus outbreaks and uneven progress in vaccinations, the Asian Development Bank said in a report last week.
The regional lender has lowered its outlook for economic growth to reflect new outbreaks of the coronavirus as the variants spread, prompting further precautions in the event of a pandemic.
The Asian Development Bank based in Manila, Philippines, forecasts growth of 7.1% in 2021, falling to 5.4% in 2022. The forecast in April was 7.3% growth this year and 5. 3% in 2022.
Most regional economies will remain below their pre-pandemic levels until 2022, and some of the losses from the crisis will be permanent, Asian Development Bank economists said.
“Support for businesses and households will continue to be important for economic recovery,” Joseph Zveglich, the bank’s acting chief economist, said in an online briefing.
China’s growth forecast remained at 8.1% in 2021, with growth expected to slow to 5.5% in 2022. The country where the virus was first reported in 2019 has adopted a policy of “zero tolerance” which has brought epidemics under control and kept life in much of the country close to normal.
But as is the case with much of the region, the country discourages travel within its borders and allows only minimal international travel.
The outlook for other parts of Asia, where epidemics have been more severe, were less optimistic.
Growth in Southeast Asia is forecast at 3.1% this year, despite the rebound effect of a contraction in 2020. In 2022, the Asian Development Bank expects the region’s economy is growing at a rate of 5%.
In South Asia, where outbreaks broke out in the spring, the bank expects economic growth of 8.8% this year and 7% next year.
Economists forecast only moderate inflation despite widespread concern that soaring prices for oil and other commodities and commodities could prompt central banks to cut back on the massive support they have provided since the pandemic hit early 2020.
The Asian Development Bank put inflation for Asia at 2.2% in 2021 and 2.7% next year.
Financial risks also appeared subdued, despite fears that a potential default from China’s largest real estate developer could spill over into global markets, economists said.
The situation around Evergrande Group, a private developer struggling to honor tens of billions of dollars in debt, deserves “close monitoring,” said Abdul Abiad, director of the macroeconomic research department at the Asian Development Bank .
But Chinese banks have large reserves of capital and the government is likely to step in to stem the fallout if it defaults on its debts, he said.
Economists also said they saw no significant risk of a market collapse, or “tantrums” in reaction to a tightening of the Federal Reserve’s monetary policy.
Almost two years after the start of the pandemic, the Fed has said it does not plan to start raising current ultra-low interest rates until 2023. And plenty of central bank stimulus will help isolate economies as they slack off on such support, he said.
“Normalization will come, but we don’t think it’s a risk in the short term,” Abiad said.
A more pressing concern is the slow and uneven pace of vaccine deployment.
The 46 countries covered by the Asian Development Bank report had only 27.8% of their population fully immunized as of Aug.31, according to the report. Rates vary widely from around 80% in Singapore to less than 10% in Burma, Pakistan and Vietnam.
Speeding up the pace of vaccinations is crucial because it can help change the whole nature of the pandemic, according to the report.
The Asian Development Bank has also urged governments to do more to improve agricultural incomes and productivity, given the critical role that poverty reduction plays – the mission of the Bank.
The pandemic has plunged 75 to 80 million people in developing Asia into extreme poverty, according to the report. This has resulted in greater food insecurity.
Almost three-quarters of the 291 million people newly vulnerable to hunger are in Asia, mostly in Bangladesh, India, Indonesia and Pakistan, the statement said.
FILE – In this September 29, 2020 file photo, women walk past models wearing masks advertised for sale at a store in Makati City, Philippines. Developing economies in Asia are likely to experience slower-than-expected growth due to protracted outbreaks of COVID-19 and uneven progress in vaccinations, the Asian Development Bank said in a report on Wednesday, September 22, 2021 (AP Photo / Aaron Favila, File)