The Asian Development Bank (ADB) on Thursday forecasted that economic activity in developing Asia would contract by 0.4%, an improvement from 0.7% shrinkage in September.

In a report, the bank said economic activity in developing Asia, a group of 46 nations in the Asia-Pacific region, is forecast to pick up to 6.8% growth in 2021 as the region moves towards recovery from the effects of the novel coronavirus pandemic.

“The outlook for developing Asia is showing improvement. Growth projections have been upgraded for the People’s Republic of China [PRC] and India, the region’s two largest economies,” said ADB Chief Economist Yasuyuki Sawada.

“A prolonged pandemic remains the primary risk, but recent developments on the vaccine front are tempering this. Safe, effective, and timely vaccine delivery in developing economies will be critical to support the reopening of economies and the recovery of growth in the region,” Sawada added.

Pandemic-induced lockdowns and restrictions have been eased to varying degrees in the region, with merchandise exports rebounding quickly from substantial declines in the second quarter.

“Mobility is also returning to pre-COVID-19 levels in East Asia and the Pacific, where the spread of COVID-19 has largely been contained or prevented in recent months. A recovery in tourism, however, is likely to be delayed,” said the report.

“Most of developing Asia’s subregions are forecast to contract this year. East Asia is the exception, with an upgraded growth forecast of 1.6% for 2020 on the back of faster than expected recoveries in the PRC and Taiwan. East Asia’s growth outlook for 2021 is maintained at 7.0%,” according to the report.

The ADB forecasted the South Asia’s GDP could contract by 6.1% in 2020, revised up from the 6.8% contraction expected in September.

“Growth in South Asia is forecast to rebound to 7.2% in 2021. The growth forecast for India, the subregion’s largest economy, for fiscal year (FY) 2020 is raised to -8.0% from the -9.0% projection in September, while outlook for FY2021 is kept at 8.0%,” the bank said.

Economic growth in Southeast Asia remains under pressure as COVID-19 containment measures continue, particularly in Indonesia, Malaysia, and the Philippines.

While the Central Asia’s growth forecast for 2020 remains at -2.1% in the report, the outlook for 2021 was slightly downgraded to 3.8% from 3.9% in September.

The ADB estimated that regional inflation is expected to marginally ease to 2.8% in 2020, from the 2.9% projected in September, due to depressed demand and low oil prices.

“Inflation for 2021 is forecast at 1.9%, down from 2.3% forecast in September. Oil prices are retained at $42.50 per barrel in 2020 before increasing to $50.00 per barrel in 2021,” the report added.

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