Asian Development Outlook Update, September 2020

Economic Forecasts

The threat of a prolonged COVID-19 pandemic is the main risk to the outlook. A return to more stringent containment measures could slow or even derail recovery and possibly trigger financial turmoil. While economies in developing Asia remain resilient, continued policy support is needed to underpin recovery.

Economic forecasts have since been updated 

Key Messages

  • Developing Asia will contract by 0.7% this year, its first contraction in six decades. Growth will rebound to 6.8% in 2021.
  • The downturn is broad-based—three-fourths of the region's economies are expected to contract this year. The People's Republic of China (PRC) is an important exception.
  • Depressed demand and low oil prices offset supply disruptions, keeping regional inflation at 2.9% in 2020, and trimming it to 2.3% in 2021.
  • The main risk stems from the prospect of a prolonged COVID-19 pandemic, which could derail the recovery.
  • The theme chapter discusses the role of wellness in development and how the wellness economy can help drive the post-COVID recovery.

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Developing Asia Outlook

As the pandemic persists, developing Asia is projected to contract by 0.7% in 2020—the first regional GDP contraction since the early 1960s. Developing Asia excluding the newly industrialized economies will also contract by 0.5%. Growth is forecast to rebound to 6.8% in 2021, but this will still leave GDP next year substantially below expectations before COVID-19. Thus, the regional recovery will be L-shaped or “swoosh-shaped” rather than V-shaped.

As a result of the COVID-19 pandemic, developing Asia will contract for the first time in nearly six decades in 2020, setting back efforts to lift hundreds of millions of people out of poverty, says ADB's Chief Economict Yasuyuki Sawada.

Depressed Demand and Lower Oil Prices Will Contain Regional Inflation

The 2020 inflation forecast for the whole region is revised down from 3.2% to 2.9% as the slowdown in demand is expected to outweigh inflationary supply-side disruptions, and with the abatement of last year’s food price shocks. More muted inflation expectations do not apply to South or Central Asia, however, where inflation forecasts are revised up on supply disruption due to the pandemic and, in some economies, currency depreciation. Inflation in 2021 is expected to ease further to 2.3%.

Theme Chapter: Wellness in Worrying Times

Wellness is vital for post-pandemic recovery in developing Asia.

COVID-19 underlines the importance of wellness, or the deliberate pursuit of activities that bring holistic health, happiness, and well-being. Public health, both physical and mental, has taken a beating during this pandemic. In Asia, as elsewhere, wellness can revive the human body, mind, and spirit, which are the first steps toward rebuilding the economy and society.

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Wellness is a large and growing part of the Asian economy.

Even before COVID-19, Asians demanded more wellness as their incomes rose, chronic lifestyle diseases became more prevalent, and the population aged. A result has been a rapidly growing wellness economy, comprising industries that enable consumers to incorporate wellness activities into their daily lives. The wellness economy provides 11% of output in Asian countries, having grown annually by 10% in recent years. COVID-19 is likely to further boost demand in the coming years and support a strong recovery.

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Asian wellness traditions can serve both well-being and the economy.

Although modern wellness industries originated in Western countries, Asia has a wealth of wellness traditions. Those traditions are productive assets for the wellness economy. At the same time, tapping these traditions can promote mental and physical health in the lives of Asians. As such, the present is the opportune time for Asia to rediscover its wellness roots.

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Wellness polices should be comprehensive and target all Asians.

Government efforts to boost physical and mental well-being fall into four policy domains: create a healthy urban environment, enable and support physical activity, encourage healthy diets, and enhance wellness in the workplace. Because healthy aging begins in childhood, a lifelong wellness policy framework such as Japan’s 100-Year Life Program should complement the four policy domains. And, because the poor have fewer opportunities for wellness activities, governments must invest in wellness infrastructure that benefits them.

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Wellness is vital for developing Asia’s recovery from COVID-19, as the physical and mental wellness of so many Asians has taken a battering during the acute phase of the pandemic. In addition, wellness can contribute to sustainable development and promote people’s mental and physical well-being, including the poor.

Publication and Links

Asian Development Outlook (ADO) 2020 Update Wellness in Worrying Times publication cover

Asian Development Outlook (ADO) 2020 Update: Wellness in Worrying Times

The Asian Development Outlook analyzes economic and development issues in developing countries in Asia. This includes forecasting the inflation and gross domestic product growth rates of countries throughout the region, including the People’s Republic of China and India.