2020 Economic Outlook for Asia ‘Highly Uncertain’ Amid Pandemic, ADB Says

Dennis Jay Santos and Richel V. Umel
2020.04.03
Manila and Davao and Iligan, Philippines
200403-PH-abd-620.jpg A lone woman sits on a bench in Manila’s financial district, March 30, 2020.
Basilio Sepe/BenarNews

Growth in Asia is forecast to fall sharply to just 2.2 percent in 2020 as economies suffer the effects of COVID-19, the Asian Development Bank said in an annual report published Friday.

The figure is a downward revision from the original 5.5 percent growth for this year that the ADB forecast in September before the coronavirus pandemic broke out, the Manila-based bank said in its Asian Development Outlook 2020.

Growth could rebound by 6.2 percent for 2021, assuming that economic activity were to return to normal and the deadly pandemic ended, the report said.

“The evolution of the global pandemic – and thus the outlook for the global and regional economy – is highly uncertain,” ADB chief economist Yasuyuki Sawada said in a statement.

“Growth could turn out lower and the recovery slower than we are currently forecasting. For this reason, strong and coordinated efforts are needed to contain the COVID-19 pandemic and minimize its economic impact, especially on the most vulnerable,” Sawada said.

Growth in China, where the virus emerged in the industrial city of Wuhan, is expected to be 2.3 percent this year but rebound to 7.3 percent next year, the report said.

“Underpinning much of the weakness across Asia is a deteriorating external environment, with growth stagnating or contracting in the major industrial economies of the United States, Euro area and Japan,” the ADB said.

It published its report on the heels of a World Bank report, which predicted that Malaysia and Thailand – even in a best-case scenario – would plunge into recession as a result of economic fallout from the pandemic.

On Tuesday, the World Bank sharply revised its GDP growth projection for Malaysia this year, from 4.5 percent to -0.1 percent and for Thailand from 2.9 percent to -3 percent. The last time Malaysia’s economy shrank was in 2009. It posted growth of 4.3 percent last year, while Thailand grew 2.4 percent.

The ADB report also posted a dire warning for nations in Southeast Asia.

“Thailand, the second-largest economy in the sub-region, will likely contract by 4.8 percent this year, continuing a steady slide in recent years. Growth in the closely intertwined economies of Malaysia and Singapore will plummet nearly to zero in 2020, with only Malaysia enjoying a strong rebound next year,” it said, adding Indonesia would see “sharp deceleration” as well.

Quarantine pulls down Philippine economy

For the Philippines, the ADB projects gross domestic product to level off at 2 percent this year following an order by President Rodrigo Duterte to place the main island of Luzon – home to about 60 million people – under quarantine.

The country is in its third week of the quarantine, which has affected the sectors of tourism, trade and manufacturing among others. Many companies have closed and workers are confined to their homes as the economy virtually ground to a halt.

The ADB expects a “strong recovery” of 6.5 percent next year, assuming the Philippine government manages to curb COVID-19 infections by June.

On Friday, the health department reported 29 new deaths, with the national toll from the virus now at 136. There were also 385 new cases reported, bringing the total in the Philippines to 3,018.

Globally, more than 55,000 people have died and more than 1 million have been infected, according to the latest data compiled by disease experts at Johns Hopkins University in the United States.

The recovery could begin before next year as the ADB expects a “bounce back” starting in the second half of 2020 on the back of Manila’s stimulus spending and easing of monetary policies, ADB country director Kelly Bird said.

“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,” Bird said.

Global impact

The pandemic could cost the global economy $2 trillion to $4.1 trillion, the ADB report said, or a loss of about 2.3 percent to 4.8 percent of global gross domestic product.

The rapid spread of the coronavirus “has made it the worst pandemic in a century,” the ADB said, noting that it was still ravaging China when the bank released estimates of its economic impact early last month.

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