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Developing Asia’s economic growth to contract this year

panorama.am4 days ago
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Developing Asia’s economic growth to contract this year

Economies across developing Asia will contract this year for the first time in nearly 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) on Monday.

The Asian Development Outlook (ADO) 2020 Update forecasts -0.7% gross domestic product (GDP) growth for developing Asia this year—marking its first negative economic growth since the early 1960s. Growth will rally to 6.8% in 2021, in part because growth will be measured relative to a weak 2020. This will still leave next year’s output below pre-COVID-19 projections, suggesting an “L”-shaped rather than a “V”-shaped recovery. About three-quarters of the region’s economies are expected to post negative growth in 2020.

The ADO 2020 Update has lowered its GDP growth for Armenia to -4%, a further drop from the -3.5% that was projected in April 2020. GDP growth is expected to pick up to 3.5% in 2021. Under COVID-19, Armenia’s economy reversed 7.0% growth a year earlier to contract by 5.7% in the first half of this year. The inflation forecast for Armenia is revised downwards to 1.4% this year from 2.8% forecast in April, due to continued weak demand at home and abroad, low oil prices, and a fairly stable exchange rate. “The full impact of the COVID-19 pandemic on the Armenian economy is yet to be fully assessed, but global disruption from COVID-19 is expected for the rest of 2020, further weakening trade, remittances, and tourism,” said ADB Country Director for Armenia Paolo Spantigati.

“Most economies in the Asia and Pacific region can expect a difficult growth path for the rest of 2020,” said ADB Chief Economist Yasuyuki Sawada. “The economic threat posed by the COVID-19 pandemic remains potent, as extended first waves or recurring outbreaks could prompt further containment measures. Consistent and coordinated steps to address the pandemic, with policy priorities focusing on protecting lives and livelihoods of people who are already most vulnerable, and ensuring the safe return to work and restart of business activities, will continue to be crucial to ensure the region’s eventual recovery is inclusive and sustainable.”

A prolonged COVID-19 pandemic remains the biggest downside risk to the region’s growth outlook this year and next year. 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, equivalent to about 15% of regional GDP.

Other downside risks arise from geopolitical tensions, including an escalation of the trade and technology conflict between the United States and the People’s Republic of China (PRC), as well as fi...

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