Developing Asia set to rebound in 2021 despite pandemic: ADB

Diplomatic Correspondent

29 April, 2021 12:00 AM printer

Economic growth in developing Asia is set to rebound to 7.3% this year, supported by a healthy global recovery and early progress on Covid-19 vaccines, said a new report by the Asian Development Bank.

The projected resurgence follows a 0.2% contraction last year, according to the ADB’s flagship economic publication, Asian Development Outlook (ADO) 2021, released Wednesday.

The region’s growth is forecast to moderate to 5.3% in 2022.

 Excluding the newly industrialized economies of Hong Kong, China, Korea, Singapore, and Taipei, China, developing Asia’s economic activity is expected to grow 7.7% this year and 5.6% in 2022, said an ADB press release.

“Growth is gaining momentum across developing Asia, but renewed Covid-19 outbreaks pose a threat to recovery,” said ADB Chief Economist Yasuyuki Sawada.

“Economies in the region are on diverging paths. Their trajectories are shaped by the extent of domestic outbreaks, the pace of their vaccine rollouts, and how much they are benefiting from the global recovery.”

Rising exports are boosting some economies in developing Asia amid strengthening global economic     

activity, including a rebound in manufacturing.

Progress on the production and delivery of vaccines has contributed to this momentum, but the pandemic remains the biggest risk for the region as potential delays in vaccine rollouts or significant new outbreaks could undermine growth.

 Other risks include increasing geopolitical tensions, production bottlenecks, financial turmoil from tightening financial conditions, and long-term scarring—for instance, learning losses due to school closures.

Most economies in developing Asia will see healthy growth this year and in 2022.

Central Asian economies are forecast to grow 3.4% on average this year and 4.0% next year.  The trade-dependent economies of Southeast Asia will also recover, with the sub-region forecast to grow 4.4% this year and 5.1% in 2022 after contracting 4.0% in 2020.

Pacific economies, still affected by global travel restrictions and a collapse in tourism, will post modest growth this year at 1.4%, before expanding by 3.8% next year.

Strong exports and a gradual recovery in household consumption will boost economic activity in China this year.

The country’s GDP is forecast to expand 8.1% in 2021 and 5.5% in 2022.

East Asia’s GDP is expected to grow 7.4% in 2021 and 5.1% in 2022.

India’s economy, meanwhile, is expected to grow 11.0% in fiscal year 2021, which ends on 31 March 2022, amid a strong vaccine drive.

However, the recent surge in Covid cases may put this recovery at risk.

India’s GDP is expected to expand 7.0% in FY2022. This year, South Asia’s GDP growth is expected to rebound to 9.5%, following a 6.0% contraction in 2020, before moderating to 6.6% next year.

Inflation in developing Asia is projected to fall to 2.3% from 2.8% last year, as food-price pressures ease in India and China.

The region’s inflation rate is forecast to rise to 2.7% in 2022.

The report also examines the costs of pandemic-induced school closures across developing Asia.

The countries are using distance learning, but this is only partially effective as many students lack access to computers and the internet. These disruptions will affect the skills students acquire and, eventually, their productivity and earnings as future workers.

Learning losses range from 8.0% of a year of learning in the Pacific, where schools have mostly stayed open, to 55% in South Asia, where school closures have been longest.

The present value of students’ future earning reductions is estimated at $1.25 trillion for developing Asia, equivalent to 5.4% of the region’s GDP in 2020.