Economic growth in developing Asia is set to rebound to 7.3 percent in 2021, supported by a healthy global recovery and early progress on coronavirus disease (COVID-19) vaccines, revealed to a new report from the Asian Development Bank (ADB).
The projected resurgence follows a 0.2pc contraction last year, according to ADB’s Asian Development Outlook (ADO) 2021, released today. The region’s growth is forecast to moderate to 5.3% in 2022. Excluding the newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei,China, developing Asia’s economic activity is expected to grow 7.7% this year and 5.6% 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% on average this year and 4.0% next year. The trade-dependent economies of Southeast Asia will also recover, with the subregion forecast to grow 4.4% this year and 5.1% in 2022 after contracting 4.0% in 2020. Pacific economies, still affected by global travel restrictions and a collapse in tourism, will post modest growth this year at 1.4%, before expanding by 3.8% 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% in 2021 and 5.5% in 2022. East Asia’s GDP is expected to grow 7.4% in 2021 and 5.1% in 2022.
India’s economy, meanwhile, is expected to grow 11.0% in fiscal year (FY) 2021, which ends on 31 March 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 7.0% in FY2022. This year, South Asia’s GDP growth is expected to rebound to 9.5%, following a 6.0% contraction in 2020, before moderating to 6.6% next year.
Inflation in developing Asia is projected to fall to 2.3% from 2.8% last year, as food-price pressures ease in India and the PRC. The region’s inflation rate is forecast to rise to 2.7% 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 8.0% of a year of learning in the Pacific, where schools have mostly stayed open, to 55% in South Asia, where school closures have been longest. The present value of students’ future earning reductions is estimated at $1.25 trillion for developing Asia, equivalent to 5.4% of the region’s GDP in 2020.