Asian Economies Recovering Fast But Paths Diverge, ADB Says

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Developing Asia’s economy will rebound faster this year than previously estimated, as nations tread diverging recovery paths, according to the Asian Development Bank.

The region’s gross domestic product will expand 7.3% this year, better than the 6.8% forecast in December and a turnaround from last year’s 0.2% contraction, the ADB said in its Asian Development Outlook released Wednesday. It sees developing Asia’s growth moderating to 5.3% in 2022.

“Economies in the region are on diverging paths,” ADB Chief Economist Yasuyuki Sawada said. “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.”

Asian Economies Recovering Fast But Paths Diverge, ADB Says

Strong exports and a recovery in household consumption will help China’s economy to expand 8.1% this year -- faster than the 7.7% forecast previously -- and by 5.5% next year, the Manila-based lender said. India will grow 11% in fiscal year 2021, which ends in March 2022, but the recent surge in coronavirus cases may put this recovery at risk.

Southeast Asia’s forecast was lowered to 4.4% growth this year amid reduced projections for Malaysia, the Philippines and Thailand.

“The most significant threat to this outlook is the unfavorable evolution of the Covid pandemic,” Sawada said Wednesday morning in an interview with Bloomberg TV’s Rishaad Salamat and Haslinda Amin, citing both renewed outbreaks of the virus as well as the effectiveness of national vaccination plans.

‘Indispensable’ Stimulus

Fiscal stimulus that softened the pandemic’s blow had boosted the region’s debt burden, though at about 65% of economic output it remained “manageable,” Sawada said.

“The massive package at this moment is really indispensable to handle the downside pressure on the economy generated by the pandemic,” he said.

While the U.S. Federal Reserve’s easy monetary policy could produce some price pressures in Asia, he predicted that “substantial slack in many economies will keep a lid on inflationary pressures” over the next two years.

Other key points from the report:

  • Economic recovery is particularly strong in East Asia, but weaker elsewhere, especially in the Pacific. Differing trends are also apparent in labor markets, with unemployment declining unevenly across economies
  • The region’s average inflation is forecast to fall to 2.3% in 2021 from 2.8% as food-price pressures ease
  • Developing Asia’s current account surplus is projected to narrow to 2.1% of GDP in 2021 from 2.4%, as healthier economic activity leads to faster growth in imports than exports

©2021 Bloomberg L.P.

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