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IMF: Asias Economy is on the Verge of Encountering the Worst Growth in 2020 Due to Coronavirus

IMF: Asias Economy is on the Verge of Encountering the Worst Growth in 2020 Due to Coronavirus

Asia being the largest continent in the world has been one of the rapidly-growing regions. However, straight after 60 years, Asia as a region will not encounter any economic growth in the year 2020 due to the coronavirus pandemic as forecasted by the International Monetary Fund. The Crisis is believed to be more severe than the Global Financial Crisis. Because of the unprecedented nature of the outbreak, there always lies uncertainty with regards to the growth prospects of this year and even more so about the year 2021. It looks like, the suffering economy is all set to swamp the world and cause great distress to the people worldwide.

It has been stated that during the preceding crises including the Asian financial crisis in 1997 and the global financial crisis during 2008-2009, the region encountered an average growth rate of 1.3% and 4.7%, respectively. But the coronavirus outbreak has infected over 2 million people and managed to take lives of over 130,000 people, brought the global economic activity to a standstill. The IMF has stated that the global economy is expected to decline by 3% this year. The greatest trading partners of Asia are estimated to undergo severe shrinks such as the U.S. is estimated to contract by 5.9% whereas Europe is expected to decrease by 7.5%.

China’s Growth Outlook

China is one of the few countries which is believed to grow in 2020, but IMF has forecasted the growth of this economy only by 1.2% which is much lesser when compared with the economic performance in the past years. During the Global Financial Crisis of 2009, China still managed to maintain its growth performance with 9.4 percent unlike now due to its important monetary stimulus which was about 8 percent of the total GDP. The growth of Asia greatly depends upon the performance of China which this time does not seem to be of much help as opposed to 2009.

Current Estimates based on Existing Trends

Based on the present trends, the director of the APAC department at the IMF –Mr. Chang Yong Rhee came up with the following forecasts for Asian economies:

·       Japan to contract by 5.2%

·       India to increase by 1.9%

·       South Korea to decline by 1.2%

·      South Asia’s five major economies –Singapore, Thailand, Indonesia, Malaysia, and the Philippines to collectively decrease by 1.3%.

Nevertheless, Asia still looks relatively in better condition compared to other regions when it comes to the activity. There is a considerable chance of recovery in 2021 if all the measures that have been taken to contain the virus and the incentives to support the economy work. All the regions of the world are on the varied stages of the pandemic. While China's economy has started to get back to work, other countries are enforcing even stricter lockdowns, and then there are some that are undergoing a second wave of infection from the virus. Everything now depends upon how the virus behaves and how effective the policies turn out to be.

The Economy of South Asia

When we talk particularly about South Asia, the economy of India is stated to be the largest in the region, the growth rate is expected to be 1.5% to 2.8% against earlier expectation which was 4.8% to 5%in the fiscal year which usually starts on April 1. The alarming fact is that India along with the rest of the South Asian Countries is likely to encounter the worst growth performance in the last 40 years because of COVID-19, stated the World Bank. The South Asian region is made up of 8 countries where the estimation of economic growth is 1.8% to 2.8% this year, which was forecasted to be 6.3% six months ago.

Countries such as Sri Lanka, Nepal, Bhutan, and Bangladesh will observe an acute drop in economic growth whereas Pakistan, Maldives and Afghanistan will plunge into recession. Measures adopted to combat the coronavirus have buckled the chains of supply all across South Asia, which has encountered 13,000 cases as of now, still considered to be lesser than various parts of the world.

The lockdown of as many as 1.3 billion people in India has left millions jobless, sabotaged small and big businesses and forced evacuation of daily-wage earners and laborers to their home in small villages. These prolonged lockdowns are going to result in a massive economic fallout. To reduce the short-term economic pang, the Banks have announced several fiscal and monetary policies to lend help to unemployed daily-wage earners, laborers as well as provided debt relief to individuals and businesses. So far, India has projected an economic plan worth $23 billion to enable direct transfer of cash to millions of poor people suffering due to lockdown.

Conclusion

Regardless of the prevailing and upcoming economic scenario, the priority of all the Asian governments is to stop the spread of the virus and ensure the protection of their people, especially the smaller firms, poorest and underprivileged section of society who are suffering the most and undergoing the worst health and economic crisis.