The World Bank on Tuesday slashed economic growth forecasts across Asia this year amid the coronavirus pandemic, predicting that Malaysia and Thailand would plunge into recession even in a best-case scenario.
In a worst-case scenario, Indonesia and the Philippines would join the two other Southeast Asian nations in economic contractions, the Washington-based bank said in its “East Asia and Pacific Economic Update,” which warned that negative economic growth could push more people in the region into the poverty bracket.
“Developing economies in East Asia and the Pacific now face the prospect of a global financial shock and recession,” the report said. “Several economies are expected to contract in 2020, which will lead to an increase in the poverty rate.”
The World Bank sharply revised its GDP growth projection for Malaysia this year, from 4.5 to -0.1 percent and for Thailand from 2.9 to -3 percent. The last time Malaysia’s economy contracted was in 2009. It posted growth of 4.3 percent last year, while Thailand grew 2.4 percent.
Thailand, which has declared a state of emergency to give the government new powers to deal with the virus crisis, has closed its borders to almost all foreigners. The Buddhist-majority country, which welcomed 39 million tourists last year, reported one death and 127 new coronavirus cases on Tuesday, bringing its tally of infections to 1,651 with 10 fatalities.
Malaysia, which reported six deaths and 140 new coronavirus cases on Tuesday, said its restrictions on movements imposed two weeks ago had suppressed major spikes in the COVID-19 infections.
“So far, we are succeeding with no spike of cases,” the nation’s health minister, Noor Hisham Abdullah, said on his Twitter page. “We have not lost the war against COVID-19, neither have we won the war yet.”
With its latest COVID-19 cases, Malaysia’s total number of infections rose to 2,766 with 43 fatalities.
The World Bank, calling for fast and decision action to contain the spread of COVID-19 infection, said that “significant economic pain seems unavoidable in all countries and the risk of financial instability is high, especially in countries with excessive private indebtedness.”
“Given the unprecedented nature of the economic shock to each country, and the fact that it is also affecting all other countries in the region and beyond, an exceptional policy response is needed,” the World Bank said.
In a worst-case scenario, the bank forecast Malaysia to contract by 4.6 percent and Thailand to shrink by 5 percent this year.
Delayed containment of the coronavirus could also impact growth in Indonesia, Southeast Asia’s largest economy, the World Bank said, as it projected Jakarta’s real GDP growth to weaken significantly to 2.1 percent in 2020 in a best-case scenario from 5 percent last year.
In a worst-case scenario, the bank said Indonesia might slip into recession, posting -3.5 percent growth this year.
“Indonesians with inadequate social protection who get sick or suffer income loss due to travel restrictions can fall into poverty,” it said.
Indonesian President Joko “Jokowi” Widodo declared a public health emergency over the pandemic on Tuesday as he rolled out an additional 405.1 trillion rupiah (U.S. $24.8 billion) to be spent on medical supplies and social safety net programs.
Jokowi said the new regulation that allows the government to increase spending to tackle the COVID-19 crisis will widen the 2020 budget deficit to as much as 5.07 percent of the gross domestic product.
Three weeks ago, Indonesia announced a 120 trillion rupiah ($8.1 billion) stimulus package, including tax breaks for companies and tax relief for manufacturing workers, to shore up confidence as the pandemic caused financial markets to tumble.
Finance Minister Sri Mulyani Indrawati had warned that Indonesia’s economy could slow to 4.7 percent this year if the virus outbreak slows global growth.
The World Bank also significantly lowered its growth forecast for the Philippines this year from 5.9 percent to 3 percent.
It said its marked reduction in growth outlook reflects the impact of the pandemic under a scenario where the current large-scale disruption of economic activities would extend for most of the year, before a partial recovery toward the year end.
“Growth outlook for 2020 is gloomy given the global impact of the COVID-19 pandemic and the strict community quarantine that has taken place in Luzon since March 17, 2020,” the World Bank said, referring to the nation’s main island, which has been under an “enhanced community quarantine.”
Philippine economic growth slowed in 2019 to its weakest pace in eight years, driven by an investment contraction and export growth deceleration, according to World Bank figures. In a worst-case scenario, the bank projected the Philippines to fall into recession this year, contracting 0.5 percent
Manila’s health authorities on Tuesday confirmed 10 more coronavirus deaths, bringing the nation’s toll to 88, with 2,084 infections.
Globally, 42,032 people have died and more than 855,000 others have been infected, according to the latest data compiled by disease experts at Johns Hopkins University in the United States.