Economic growth in developing Asia is set to rebound to 7.3 per cent this year, supported by a healthy global recovery and early progress on coronavirus disease (COVID-19) vaccines, according to a new report from the Asian Development Bank (ADB).
The projected resurgence follows a 0.2 per cent contraction last year, revealed ADB’s flagship economic publication, Asian Development Outlook (ADO) 2021.
The region’s growth is forecast to moderate to 5.3 per cent in 2022. Excluding the newly industrialised economies of Hong Kong, the Republic of Korea and Singapore developing Asia’s economic activity is expected to grow 7.7 per cent this year and 5.6 per cent in 2022.
ADB said Brunei Darussalam’s economy is expected to strengthen in 2021 and 2022 on an improving external environment with economic growth of 2.5 per cent this year and 3.0 per cent in 2022.
“Growth is gaining momentum across developing Asia, but renewed COVID-19 outbreaks pose a threat to recovery,” said ADB Chief Economist Yasuyuki Sawada. “Economies in the region are on diverging paths. Their trajectories are shaped by the extent of domestic outbreaks, the pace of their vaccine rollouts, and how much they are benefiting from the global recovery.”
Rising exports are boosting some economies in developing Asia amid strengthening global economic activity, including a rebound in manufacturing. Progress on the production and delivery of COVID-19 vaccines has contributed to this momentum, but the pandemic remains the biggest risk for the region as potential delays in vaccine rollouts or significant new outbreaks could undermine growth.
Other risks include increasing geopolitical tensions, production bottlenecks, financial turmoil from tightening financial conditions, and long-term scarring — for instance, learning losses due to school closures.
Most economies in developing Asia will see healthy growth this year and in 2022. Central Asian economies are forecast to grow 3.4 per cent on average this year and 4.0 per cent next year.
The trade-dependent economies of Southeast Asia will also recover, with the subregion forecast to grow 4.4 per cent this year and 5.1 per cent in 2022 after contracting 4.0 per cent in 2020. Pacific economies, still affected by global travel restrictions and a collapse in tourism, will post modest growth this year at 1.4 per cent, before expanding by 3.8 per cent next year.
Strong exports and a gradual recovery in household consumption will boost economic activity in the People’s Republic of China (PRC) this year. The country’s gross domestic product (GDP) is forecast to expand 8.1 per cent in 2021 and 5.5 per cent in 2022. East Asia’s GDP is expected to grow 7.4 per cent in 2021 and 5.1 per cent in 2022.
India’s economy, meanwhile, is expected to grow 11 per cent in fiscal year (FY) 2021, which ends on March 31, 2022, amid a strong vaccine drive. However, the recent surge in COVID-19 cases may put this recovery at risk. India’s GDP is expected to expand seven per cent in FY2022.
This year, South Asia’s GDP growth is expected to rebound to 9.5 per cent, following a 6.0 per cent contraction in 2020, before moderating to 6.6 per cent next year.
Inflation in developing Asia is projected to fall to 2.3 per cent from 2.8 per cent last year, as food-price pressures ease in India and the PRC. The region’s inflation rate is forecast to rise to 2.7 per cent in 2022.
The report also examines the costs of pandemic-induced school closures across developing Asia. Countries are using distance learning, but this is only partially effective as many students lack access to computers and the Internet.
These disruptions will affect the skills students acquire and, eventually, their productivity and earnings as future workers. Learning losses range from eight per cent of a year of learning in the Pacific, where schools have mostly stayed open, to 55 per cent in South Asia, where school closures have been longest.
The present value of students’ future earning reductions is estimated at USD1.25 trillion for developing Asia, equivalent to 5.4 per cent of the region’s GDP in 2020.
ADB shared that it is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty.