The Asian Development Bank has cut its 2021 economic growth forecast for developing Asia as the COVID-19 pandemic continues to dominate the region’s outlook, with the emergence of new variants, uneven vaccine rollouts and renewed lockdowns posing roadblocks to recovery.
The Manila-based multilateral bank said Wednesday that it now expects developing Asia’s gross domestic product growth at 7.1%, down from the 7.3% it predicted in April. The region includes China, South Korea, India, Singapore and other countries across South, East and Central Asia, as well as the Pacific. It excludes Japan, Australia and New Zealand.
Since the ADB published its previous batch of forecasts, Asia has been hit by surges of Covid-19 and the highly contagious Delta variant. Countries’ varying degrees of responsiveness continues to contribute to diverging paths of recovery.
The bank continues to expect South and East Asia to be the main engines of growth, largely due to powerhouses India and China. India has been battered by COVID-19, but ADB still forecasts double-digit growth for the country this year, though at 10.0% versus 11.0% previously. China’s growth view is maintained at 8.1%.
“The recovery in global demand for exports from developing Asia, supported by robust growth in advanced economies, will continue to benefit the region’s export-oriented economies,” it said.
ADB noted that growth in the largest economies accelerated in the first half of the year from the preceding six months, particularly in countries like Singapore and China, which quickly rolled out vaccines and reined in outbreaks. That allowed them to avoid reimposing lockdowns and tap the rebound in global demand. Places like Thailand that were slower to vaccinate were held back by fresh waves of infections. ADB’s growth forecast for Malaysia, which reimposed mobility restrictions several times this year to curb outbreaks, was cut to 4.7% from 6.0%, while Thailand’s was slashed to 0.8% from 3.0%.
“Developing Asia’s progress on vaccination remains uneven and lags behind the rollout in advanced economies,” the ADB said, noting that as of the end of August, 28.7% of the population had been fully vaccinated, compared with 51.8% in the U.S. and 58.0% in the European Union.
Rising inflation remains a key focal point, particularly in the face of surging global commodity prices, but the bank thinks it remains largely in check and close to the targets of most central banks in the region.
It expects inflation in developing Asia to remain moderate at 2.2% this year before accelerating to 2.7% in 2022. That compares with the 2.3% figure the bank projected in its April outlook.
ADB reckons the recovery should continue to be supported by expansionary fiscal and monetary policies, noting that most central banks have refrained from raising policy rates after cutting them in 2020.
Further down the line, ADB sees other risks to regional growth stemming from geopolitical tensions and climate change.
“As economies recover from the pandemic, medium-term risks will take center stage again, led by the natural disasters and extreme weather events related to climate change,” said Joseph E. Zveglich Jr., ADB’s acting chief economist.
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September 22, 2021 at 08:00AM
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