ADB Says Coronavirus Might Halve GDP Growth in Developing Asia

  • ADB Says Coronavirus Might Halve GDP Growth in Developing Asia

ADB Says Coronavirus Might Halve GDP Growth in Developing Asia

Regional economic growth in developing Asia will decline sharply in 2020 due to the effects of the novel coronavirus (COVID-19) pandemic, before recovering in 2021, according to the Asian Development Outlook (ADO) 2020, the Asian Development Bank's (ADB) annual flagship economic publication. Growth in India will remain subdued after the country suffered a sharp slowdown a year ago, from 6.1 per cent in fiscal 2019 to 5 per cent, as a credit crunch that originated in the non-banking financial sector severely hampered bank lending, the Manila-based lender said.

China, which reported the first case of the disease, would see growth slump to just 2.3 percent from 6.1 percent in 2019, while regional growth would struggle forward by 2.2 percent, starkly softer than last year's 5.7 percent, ADB said.

Exports are projected to grow by 3.6 per cent in 2020 and by 11.9 per cent in 2021, while modest domestic expansion and higher FDI are expected to raise imports by 1.1 per cent in 2020 and by 7 per cent in 2021.

"This unprecedented and extraordinary public health emergency brought about by the COVID-19 pandemic will substantially slow down economic growth this year, with most of the contraction in the economy occurring in the second quarter", said ADB Country Director for the Philippines Kelly Bird.

"No one can say how widely the Covid-19 pandemic may spread, and containment may take longer than now projected", ADB chief economist Yasuyuki Sawada said.

Inflation is projected to accelerate to 11.5% in FY2020, reflecting a sharp rise in food prices in the first part of the fiscal year and a 9.8% drop in the value of the local currency against the U.S. dollar in the first 7 months of FY2020.

Mr. Sawada said the economic fallout will be higher if the COVID-19 outbreak is not contained by September.

The ADB said South Korea's exports are less likely to grow this year, citing weaker growth anticipated in major advanced economies and China, South Korea's largest trading partner.

"The projected slowdown is in sharp contrast to earlier signs of a growth rebound in 2020". Sustained interest in the government's Build, Build, Build program and private consumption will drive economic growth next year, it said.

Were the virus to spread widely within India, economic activity would be severely constrained, ADB said.

On the government's fiscal position, it has projected the current account deficit in 2020-21 to narrow to the equivalent of 0.3 per cent of GDP as global growth and oil prices falter. The South Asian region will face a milder slowdown as compared to larger trends, the report said.

As such, she said the government could draw from a $6.5 billion Covid-19 response package to meet the immediate needs of its developing member countries to stimulate their economies and provide social protection.

Globally, the pandemic could cost the economy $4.1 trillion, the ADB said. A shorter containment period could reduce the losses to $2 trillion, it added. "COVID-19 and the measures required to contain it have curtailed movement of labor, disrupted livelihoods and supply chains, and created cash flow problems for businesses, representing simultaneous demand and supply shocks", said ADB's Senior Country Economist for Sri Lanka Utsav Kumar.