Developing Asia, a group of 40 emerging nations, would most probably record its weakest growth in nearly six decades this year, the Asian Development Bank (ADB) said on Thursday.
Excluding the newly industrialised economies of the group – Hong Kong, Taiwan, South Korea and Singapore – Developing Asia is forecast to grow 0.4 percent this year. The growth would rebound to 6.6 percent in 2021, when the Covid-19 induced economic pains would begin to wane.
Hit hard by Covid-19, South Asia is forecast to contract by 3 percent in 2020, compared to 4.1 percent growth predicted in April. Growth prospects for 2021 are revised down to 4.9 percent from 6 percent, it said.
India's credit score moved a step closer to junk after Fitch Ratings Ltd cut the outlook to negative, citing weak economic growth prospects and rising public debt.
Fitch said it expects economic activity to contract by 5% in the fiscal year to March 2021 as a result of measures to contain Covid-19. However, the country's economy would rebound to 9.5 percent growth in the next fiscal year.
In the outlook report published on April 3, ADB had had projected that India's economic growth rate will slip to 4 percent in the current fiscal on account of the global health emergency created by the Covid-19 pandemic. "Economies in Asia and the Pacific will continue to feel the blow of the Covid-19 pandemic this year even as lockdowns are slowly eased and select economic activities restart in a 'new normal' scenario," said ADB Chief Economist Yasuyuki Sawada.
Sawada further said, "while we see a higher growth outlook for the region in 2021, this is mainly due to weak numbers this year, and this will not be a V-shaped recovery. Governments should undertake policy measures to reduce the negative impact of Covid-19 and ensure that no further waves of outbreaks occur." As per ADB forecast, risks to the outlook remain on the downside.
The Covid-19 pandemic may see multiple waves of outbreaks in the coming period and sovereign debt and financial crises cannot be ruled out. "There is also the risk of renewed escalation in trade tensions between the United States and the People's Republic of China (PRC)," it added.
For countries in Developing Asia, ADB forecasts growth of 0.1 for the region in 2020. This is down from the 2.2 percent forecast in April and would be the slowest growth for the region since 1961, it said.Growth in 2021 is expected to rise to 6.2 percent, as forecast in April. Gross domestic product (GDP) levels in 2021 will remain below what had been envisioned and below pre-crisis trends.