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ADB: Developing Asia economies will shrink in 2020

Asian economies to contract in 2020 for first time since 60s: ADB

The country's growth outlook for next year was set at 3.3 percent, which was down 0.2 percentage point from the June projection, reflecting the second epidemic wave which triggered another round of social distancing in August-September.

In the first quarter of the current fiscal year, India's GDP contracted by a record 23.9 per cent as lockdowns stalled consumer and business spending.

"The downturn is across the board, with nearly three-fourths of regional economies projected to contract - the largest such share in the past six decades", the bank said in the latest update to its outlook.

For the 2021-22 fiscal, S&P expects economic growth at 10 per cent. That will still leave next year's level of GDP below pre-coronavirus projections, implying that the recovery is only "partial" and "not full".

About three-quarters of the region's economies are expected to post negative growth in 2020.

Developing Asia - stretching from the Cook Islands in the Pacific to Kazakhstan in Central Asia - is expected to contract in 2020 for the first time in almost six decades, throwing tens of millions of people into poverty, the Philippines-based lender said.

Policies focused on protecting lives and livelihoods, and ensuring a safe return to work and restart of businesses, are crucial to ensuring a sustained recovery for the region, he said.

In contrast, India, which is one of the hardest hit countries in the world with over 4.8 million infections despite lengthy lockdowns, is expected to shrivel by nine percent in 2020 before expanding by eight percent next year.

The bank included that federal governments in the area had actually invested $3.6 tn on policy steps in reaction to the pandemic, comparable to 15 percent of local GDP, and mostly in the type of earnings assistance. The rate is forecast at 6.8 percent, although the bank warns that a prolonged pandemic remains "the biggest downside risk".

The economy is expected to rebound in 2021 as the outbreak is contained, the economy is further opened, and more government stimulus measures are implemented.

The possibility of a prolonged disruption of tourism and external demand and supply chains continues to weigh on the growth forecast, as does the prospect of a slowdown in government processes following parliamentary elections in October.

The report said that China, where the pandemic began, has already begun to recover and will see its economy grow 1.8% this year and 7.7% in 2021.

Depressed demand and lower oil prices allowed the ADB to keep its inflation forecast for developing Asia at 2.9%, and it is predicted to slow further to 2.3% in 2021.

A woman in India reacts as a health worker takes a swab sample to be tested for Covid-19.