- Developing Asia’s economic growth forecast for 2021 is trimmed to 7.1% from the 7.3% projection in April. The outlook for 2022 is raised to 5.4% from 5.3%.
- New COVID-19 variants, renewed local outbreaks, the reinstatement of various levels of restrictions and lockdowns, and slow and uneven vaccine rollouts are weighing down the region’s prospects.
- The recovery path within the region remains uneven. In 2021, East Asia and Central Asia will grow by 7.6% and 4.1%, respectively. Projections for Southeast Asia, South Asia, and the Pacific, meanwhile, are downgraded to 3.1%, 8.8%, and -0.6%, respectively.
ADB is lowering its 2021 economic growth outlook for developing Asia amid continuing concerns over the COVID-19 pandemic. The forecast for this year is trimmed to 7.1% from the 7.3% projection in April, according to an update of the bank’s flagship economic publication, Asian Development Outlook (ADO) 2021. The outlook for 2022 is raised to 5.4% from 5.3%. New COVID-19 variants, renewed local outbreaks, the reinstatement of various levels of restrictions and lockdowns, and slow and uneven vaccine rollouts are weighing down the region’s prospects.
What are the main factors shaping developing Asia's economic outlook?
How quickly Asia rebounds from the pandemic depends on two things: vaccines and variants. Successful vaccine rollouts are turning COVID-19 into a less deadly disease, and this is changing the nature of the pandemic. Where vaccinations have progressed most rapidly, a greater degree of "normalcy" in people's lives can return along with a pickup in economic activity.
However, we have also seen the rise of new and more infectious variants of COVID-19. Recovery has been stalled in economies that have faced severe outbreaks of these new forms of the disease. Unfortunately, many countries in the region are lagging on vaccinations, with supply being the biggest constraint. Uneven progress of vaccinations couple with the threat of new variants is contributing to diverging recovery in developing Asia's economies.
What does this mean for developing Asia's recovery?
We still expect a strong bounceback this year, although not as strong as we projected in our April outlook. We forecast developing Asia will grow at 7.1% this year, which is slightly below our 7.3% forecast from April. As global demand and tourism strengthen, we expect the region will expand by 5.4% next year. However, it's an uneven recovery this year – good for some, and not so good for others.
The outlook has improved for East Asia, which has progressed rapidly with vaccinations and has kept outbreaks mostly at bay. It has also improved in Central Asia, which has benefited from higher commodity prices. But forecasts have been lowered for South Asia, Southeast Asia, and the Pacific, where key economies have struggled with domestic outbreaks.
What risks could undermine the region's recovery?
COVID-19 remains the biggest risk. Continuing outbreaks may be driven by new virus variants, slower-than-expected vaccine rollouts, or waning effectiveness of vaccines. This could hamper economic recovery, as we've already seen this year. At the same time, policy makers must pay heed to other risks. These include hazards from climate change and disasters, geopolitical tensions, and spillovers from tightening financial conditions in advanced economies.