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Most of the Asian economies are set for contraction

A man eats a takeaway meal in a chair placed outside a restaurant in Hong Kong’s Sham Shui Po district, Kowloon side, early in the morning of July 29, 2020, when new social distancing measures that include only licensed restaurants come into effect to do it. serving takeaway meals, to fight a new wave of coronavirus infections.

Anthony Wallace | AFP | Getty Images


1; Developing Asia, which includes countries such as China, India, Indonesia and Singapore, will contract this year for the first time in about six decades as the coronavirus pandemic continues to hammer economies around the world, said the Asian Development Bank.

In its updated Outlook report, ADB said GDP in developing Asia will contract 0.7% this year. The bank also said three-quarters of the region’s economies are expected to shrink in 2020, lowering its GDP forecasts for those countries.

The pandemic, which has infected more than 29 million people worldwide, has slowed domestic consumption, affected external demand and affected exports, ADB chief economist Yasuyuki Sawada said Tuesday on “Street Signs Asia” of CNBC.

“Furthermore, travel bans really undermine the free movement of people as well as trade in goods and services,” he said.

In an effort to slow the spread of the virus, some countries have closed their borders to non-residents while most have implemented varying degrees of social restraint, including full lockdown periods in places like India.

South and Southeast Asia

Previously, Southeast Asia was expected to grow by 1% for the year, but is now expected to contract by 3.8%, with Thailand, the Philippines and Singapore each set to decline by more than 6%. said the ADB. The Philippines and Indonesia reported the highest number of infections among Southeast Asian countries.

China, where the coronavirus epidemic was first reported in late December, is the only country that is expected to experience positive growth, albeit far below the levels recorded by the world’s second largest economy in recent years. According to the report, China will experience an expansion of 1.8% in 2020, down from a previous forecast of 2.3%, as its economy will slowly get back on track.

Infection levels in the country appear to be under control. This is in contrast to the rapid outbreak in India, which is now the epicenter of the pandemic in Asia with over 4.8 million reported cases.

India is expected to experience a 9% decline for calendar year 2020, the ADB said. This has been revised downwards from a previous 4% growth forecast. The Indian fiscal year runs from April 1st to March 31st of the following year. In the three months between April and June, the Indian economy shrank at its fastest pace of 23.9% following a nationwide lockdown between April and May.

Rebound of growth

Growth is likely to resume in 2021 with developing Asia expected to expand by 6.8%. India is set to grow 8% for the next calendar year, according to the report.

“Our basic assumption is basically that Covid-19 can be controlled by this year, towards the end of this year. Once the health risks are contained, we can predict a strong rebound,” Sawada told the CNBC. He explained that the governments of developing countries in Asia and the Pacific have already announced support measures totaling more than $ 3 trillion, including some up to 15% of GDP. Many of these countries still have room for further expansionary or accommodative policies, he said.

“I think this is very, very important to keep families alive, especially poor families and vulnerable groups, as well as micro and small businesses, so that after containing the health crisis, they can bounce back strongly”, Sawada he said, adding that “the large-scale package has helped stabilize financial markets.”

Most of the amount came from East Asian governments, especially China, ADB figures showed.

But the bank warned in its report that a prolonged spate of Covid-19 infections could stifle the recovery and further disrupt supply and demand as worsening geopolitical tensions, particularly between the US and China, remain a risk. .

Prolonged weakness could trigger crises in some economies, the ADB said.

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