ADB sees India GDP shrinking 9 per cent in FY21

Daniel Fowler
September 15, 2020

ADB has provided an initial assistance of United States dollars 600 million in loans and USD 4.4 million in grants for managing socio-economic impacts of the COVID-19 pandemic and supporting quick recovery.

"In particular, the two largest economies in the region are diverging as nascent recovery in the People's Republic of China (PRC) contrasts with continued fragility in India", it said.

Economies across developing Asia will contract this year for the first time in almost six decades but recovery will resume next year, as the region starts to emerge from the economic devastation caused by the coronavirus disease (COVID-19) pandemic, according to a report released by the Asian Development Bank (ADB) today. India's current account deficit is forecast to shrink to 0.3 percent of GDP this fiscal year, then widen to 0.6 percent of GDP in FY2021 with exports expected to recover as global growth rebounds.

China, where the virus first emerged late past year before morphing into a pandemic that has infected more than 29 million people worldwide, was one of the few economies to buck the downward trend in the region.

Growth will rally to 6.8 per cent in 2021, in part because growth will be measured relative to a weak 2020.

"Most economies in the Asia and Pacific region can expect hard growth path for the rest of 2020", ADB Chief Economist Yasuyuki Sawada said in a statement.

European Union tells Xi that China must prove investment deal is worthwhile
Despite the pandemic, economic and trade cooperation between the two sides remain robust in 2020. Beijing must follow up offers of fairer economic policies with actual concessions, they said.

Policies focused on protecting lives and livelihoods, and ensuring a safe return to work and restart of businesses, are crucial to ensuring a sustained recovery for the region, he said.

Virus containment "seems to be translated into growth performance", and a prolonged pandemic remains the biggest downside risk this year and the next, he said. To mitigate the risk, governments in the region have delivered wide-ranging policy responses including policy support packages - mainly income support - amounting to 3.6 trillion dollars or equivalent to about 15 per cent of regional GDP.

Sub-regions of creating Asia are anticipated to publish adverse development this 12 months aside from East Asia which is forecast to develop by 1.3 per cent and recuperate strongly to 7 per cent in 2021. It is expected to grow by 1.8 per cent this year and 7.7 per cent in 2021 with successful public health measures providing a platform for growth. Some economies heavily reliant on trade and tourism, particularly in the Pacific and South Asia, face double-digit contractions this year.

While the vast region is expected to bounce back next year, with GDP projected to grow 6.8 percent, it will be "substantially smaller" than forecast before COVID-19 struck.

The ADB says developing Asia's economy will shrink by 0.7% in 2020.

The report revised the Philippines' inflation forecasts to 2.4% in 2020 and 2.6% in 2021, compared with the April projections of 2.2% and 2.4%, respectively, as global oil prices stabilize.

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