COVID-19 pandemic to bring Asia’s 2020 growth to halt for first time in 60 years: IMF
The International Monetary Fund (IMF) said Asia’s economic growth this year will grind to a halt for the first time in 60 years, as the COVID-19 crisis takes a toll on the region’s service sector and major export destinations. IMF’s Asia and Pacific Deparment director, Changyong Rhee said policymakers must offer targeted support to households and firms hardest-hit by travel bans, social distancing policies and other measures aimed at containing the pandemic. “The impact of the coronavirus on the region will be severe, across the board, and unprecedented,” he said. “This is not a time for business as usual. Asian countries need to use all policy instruments in their toolkits.”
While Asia is set to fare better than other regions suffering economic contractions, the projection is worse than the 4.7 per cent average growth rates throughout the global financial crisis, and the 1.3 per cent increase during the Asian financial crisis in the late 1990s, the IMF said. The IMF expects a 7.6 per cent expansion in Asian economic growth next year on the assumption that containment policies succeed, but added the outlook was highly uncertain. Unlike the global financial crisis triggered by the 2008 collapse of Lehman Brothers, the pandemic was directly hitting the region’s service sector by forcing households to stay home and shops to shut down, the IMF said.
The region’s export powerhouses were also taking a battering from slumping demand for their goods by key trading partners such as the United States and European countries, it said. China’s economy is expected to grow by 1.2 per cent this year, down from 6 per cent growth in the IMF’s January forecast, on weak exports and losses in domestic activity due to social distancing steps. The world’s second-largest economy is expected to see a rebound in activity later this year, with growth to bounce back to 9.2 per cent next year, the IMF said. But there were risks even to China’s growth outlook as the virus could return and delay normalisation, the IMF said.
Asian policymakers must offer targeted support to households and firms hit hardest by the pandemic, the IMF said, calling also for efforts to provide ample liquidity to markets and ease financial stress faced by small and midsize firms. Emerging economies in the region should tap bilateral and multilateral swap lines, seek financial support from multilateral institutions, and use capital controls as needed to battle any disruptive capital outflows caused by the pandemic, the IMF said.
