According to the Asian Development Bank (ADB), the development of Asia stands still in 2020 but will start to recover in the next year. The accumulated economic output will drop by 0.7% in 2020 but will recover by 6.8% in 2021. Almost three-fourths of the region’s economies are expected to have a downturn this year. In 2021, the East, South, and Southeast Asia sub-regions will have an increased growth forecast.
The economy of East Asia is slowing more this year but is expected to rebound higher next year. The growth forecast for this sub-region is 1.3% in 2020 and 7.0% in 2021. Due to public health measures, The economy of the People’s Republic of China is predicted to grow by 7.7% next year.
Taipei will also avoid GDP downward this year thanks to accommodative policies. Hong Kong will experience the subregion’s largest output decline this year, due to the recession in 2019 caused by domestic political turmoil and trade tensions between the US and the People’s Republic of China. However, it is expected to grow by 5.1% next year.
Mongolia and the Republic of Korea will have a declined growth this year but will return to upward next year. Inflation forecasts for the East Asia sub-region are revised, down to 2.6% in 2020 and 1.7% in 2021 to reflect diminished demand.
The South Asia sub-region experiences considerable economic damage due to the COVID-19 pandemic. It is forecasted to sharply decline by 6.8% in 2020 and recover by 7.1% next year. The GDP of India, the largest economy of the sub-region, is set to fall by 9.0% in the fiscal year of 2020 and rise by 8.0% in the next fiscal year.
Because supply chain disruption pushed food prices up, inflationary pressures have become intense in this sub-region, especially in India. The adjusted inflation forecast for the sub-region is upward to 5.2% and 4.5% for 2020 and 2021, respectively.
Strict quarantines and travel restrictions massively inflicted most economies of the Southeast Asia sub-region. The sub-regional GDP forecast is thus revised downward to 3.8% contraction in 2020 and upward to 5.5% growth in 2021, thanks to the domestic stimulus.
As the COVID-19 pandemic has continued to break out in some countries such as Indonesia and the Philippines, and surprisingly reappeared in some regions such as Viet Nam, the economic recovery will continue slowly and painfully, mainly determined by developments in the global trade and economy.
Agricultural products from Myanmar, bouncy exports of petrochemicals from Brunei Darussalam, and work-from-home electronics from Vietnam are expected to maintain the three source economies’ growth this year.
ADB raises its 2020 growth forecast for Vietnam from 1.8% to 2.3% due to boosted public investment, recovered domestic consumption, and increased trade. However, for 2021, the growth forecast is downward to 6.1%.
The inflation is forecasted to drop by half to 1.0% this year (with deflation in Singapore, Malaysia, and Thailand) because slow demand and low oil prices have cut down price pressure, and recover at 2.3% next year.
The GDP forecast for this sub-region is downward from low growth to 2.1% contraction this year and 3.9% growth next year. The GDP of Kazakhstan, the largest economy of the sub-region, is forecasted to contract by 3.2% in 2020 because the pandemic has considerably impacted services, and recover by 2.8% in 2021. The GDP of all Central Asian countries are set to grow in 2021.
The currency depreciation in some countries will stir inflation due to supply constraints under lockdown. Therefore, the inflation forecast for this sub-region is revised, considerably upward to 8.3% this year and to 6.6% next year.
The Pacific region also suffers from economic shrinkage this year. Due to the heavy impact of the COVID-19 public health crisis, the GDP forecast of this sub-region is revised to drop substantially, to 6.1% contraction in 2020 and little growth in 2021. The average inflation is expected to reach 2.8% in 2020 and 3.1% in 2021, revised downward due to the continuous economic stagnation.
Compiled by VietnamCredit