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.
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 AfDB, based in Manila, Philippines, expects 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, AfDB 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 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.
Prospects for other parts of Asia, where outbreaks 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 AfDB expects the region’s economy to grow at a rate of 5.0%.
In South Asia, where outbreaks erupted in the spring, the AfDB expects economic growth of 8.8% this year and 7.0% 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 AfDB has estimated 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 “careful monitoring,” said Abdul Abiad, director of the AfDB’s macroeconomic research department.
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 market collapses or “tantrums” in reaction to a tightening of monetary policy by the Federal Reserve.
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 AfDB report had only 27.8% of their population fully immunized as of August 31, according to the report. Rates vary widely from around 80% in Singapore to less than 10% in Myanmar, 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 AfDB 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.
Nearly three-quarters of the 291 million people newly vulnerable to hunger are in Asia, mostly in Bangladesh, India, Indonesia and Pakistan, the statement said.
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