Developing Asian economies will grow at a solid 7.3% pace this year after contracting slightly in 2020 due to the pandemic, the Asian Development Bank says in its latest regional outlook.
But the regional lender said that forecast is in doubt as outbreaks of coronavirus flare in several countries, including Thailand, India and the Philippines.
Those setbacks threaten just as growth has been gaining momentum, said the ADB's chief economist, Yasuyuki Sawada.
“Economies in the region are on diverging paths," he 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.”
China, which first reported the virus and has been the first major economy to bounce back from the pandemic, is forecast to grow 8.1% this year, slowing to 5.5% in 2022, said the ADB report, released Wednesday.
It estimates that India’s economy will expand at an 11% pace in 2021, in line with similar forecasts from the International Monetary Fund and private economists.
Surging new cases in India — at more than 300,000 per day for the past five days — may derail that progress as hospitals are inundated with seriously ill patients, it noted.
So far, the overall impact of this spike in cases is unclear.
“Real-time data on traffic, electricity demand and mobility suggest that, so far at least, India’s virus outbreak has had more of an impact on behavior than it has on activity," Shilan Shah of Capital Economics said in a separate report.
So far, the Indian government has resisted taking the sort of drastic lockdown measures it ordered in March 2020 when millions of workers were stranded in cities, unable to work or return to their villages.
“The big unknown is whether these restrictions will be sufficient to curb the outbreak. If not and it continues, more draconian measures may still be needed," Shah said.
The ADB forecast that Myanmar's economy will contract nearly 10% this year following a military coup that has thrust the country into turmoil. The economy grew at a modest 3.3% level in 2020, before the military seized power on Feb. 1, provoking a mass civil disobedience campaign that has stifled most business activity.
The ADB economists did not foresee a significant increase in inflation, despite concerns in the U.S. and elsewhere that massive government spending and other stimulus might spark surging prices.
The ADB expects inflation in the region to fall to 2.3% this year from 2.8% in 2020, when disruptions from the pandemic pushed food prices sharply higher in some places. The inflation rate for developing Asia is forecast to rise to 2.7% in 2022.
Apart from the cost of lost lives and misery, damage to health and productivity, the pandemic has extracted a harsh toll in many ways, wiping out millions of jobs, sinking families into poverty. It also has put children far behind in their studies, the report said.
The authors estimated that the cost to future earnings from school closures amounts to $1.25 trillion, or more than 5% of regional economic activity in 2020.