SINGAPORE — Developing Asia, which includes countries like China, India, Indonesia and Singapore, will contract this year for the first time in about six decades as the coronavirus pandemic continues to hammer economies worldwide, the Asian Development Bank said.
In its updated outlook report, ADB said GDP in developing Asia will contract 0.7% this year. The bank also said three-fourths of the region's economies are set to shrink in 2020, downgrading its GDP forecasts for those countries.
The pandemic, which has now infected more than 29 million people worldwide, slowed domestic consumption, affected external demand and hit exports, Yasuyuki Sawada, ADB's chief economist, said Tuesday on CNBC's "Street Signs Asia."
"On top of this, travel bans really undermine free flow of people as well as goods and services trade," he said.
In an attempt to slow the spread of the virus, some countries have shut down borders to non-residents while most have implemented varying degrees of social restrictions, including periods of total lockdowns in places like India.
South and Southeast Asia
Southeast Asia was previously expected to grow 1% for the year, but is now predicted to contract 3.8%, with Thailand, the Philippines and Singapore each set to experience declines of more than 6%, the ADB said. The Philippines and Indonesia have reported the most number of infections among Southeast Asian countries.
China, where the coronavirus outbreak was first reported in late-December, is the only country that is expected to register positive growth, albeit far below levels the world's second-largest economy has reported in recent years. China is set to register a 1.8% expansion in 2020, down from an earlier forecast of 2.3%, as its economy slowly gets back on track, according to the report.
Infection levels in the country appear to be under control. That is in contrast to the rapid outbreak in India, which is now the pandemic's epicenter in Asia with more than 4.8 million reported cases.
India is predicted to register a 9% decline for the calendar year 2020, the ADB said. That was revised down from an earlier forecast of 4% growth. India's fiscal year runs from April 1 to March 31 the following year. In the three months between April and June, India's economy shrank at its steepest pace of 23.9% following a national lockdown between April and May.
Growth rebound
Growth will likely rebound in 2021 with developing Asia expected to register a 6.8% expansion. India is set to grow 8% for the next calendar year, according to the report.
"Our baseline assumption is basically Covid-19 can be controlled within this year, towards the end of this year. Once the health risks are contained, we can envision a strong bounce back," Sawada told CNBC. He explained that governments in developing Asia and Pacific countries have already announced support measures totaling more than $3 trillion, with some as high as 15% of GDP. Many of those countries still have room for further expansionary or accommodative policy, he said.
"I think this is very, very important to keeping households, especially poor households and vulnerable groups as well as micro-and-small enterprises maintain and keep alive, so that after the containment of health crisis, they can strongly recover back," Sawada said, adding that the "large-scale package helped to stabilize financial markets."
A bulk of the amount came from governments in East Asia, particularly China, ADB data showed.
But the bank in its report warned that a prolonged wave of Covid-19 infections could stifle recovery and further disrupt demand and supply while worsening geopolitical tensions, notably among U.S. and China, remain a risk.
Protracted weakness could trigger crises in some economies, the ADB said.