The Asian Development Bank (ADB) changed its economic outlook for India from growth to contraction, as it projected that developing Asia will likely record its weakest expansion in nearly six decades this year because of the coronavirus pandemic.
India’s economy—Asia’s third-largest—is forecast to contract by 4% in the fiscal year ending on March 31, 2021, before growing 5% the following year, the ADB said on Thursday.
The new forecasts are part of a supplement to its Asian Development Outlook report issued in April, when it had said that India’s economy was projected to grow 4% for 2020-21.
The ADB’s revised projections are broadly in line with those of other multilateral institutions. The World Bank, for instance, said earlier this month it expected the Indian economy to shrink 3.2% this year.
The Reserve Bank of India, too, said last month it expected the GDP to shrink this year, though it didn’t give any estimate. Some analysts predict a contraction of 5% or more, as a months-long lockdown to battle the pandemic has hammered economic activity.
The ADB also said that the South Asian economy will likely contract 3.0% in 2020, compared to 4.1% growth predicted in April. Apart from India, Pakistan and Bangladesh have also been heavily hit by the pandemic. But while the ADB expects Pakistan to slump into a recession, Bangladesh is likely to record growth albeit at a slower pace.
The Manila-based multilateral lender also revised its outlook for China. It now expects the world’s second-largest economy to grow 1.8% this year compared with the previous forecast of 2.3%.
Overall, developing Asia—a group of 45 countries in the Asia-Pacific region—is projected to grow just 0.1% in 2020, the ADB said. This would be the slowest pace since 1961, it said, adding the region would grow 6.2% next year.
The revised forecasts show that the pandemic will hurt developing Asia more than previously estimated in April, which predicted 2.2% growth for the region in 2020.
“Economies in Asia and the Pacific will continue to feel the blow of the COVID-19 pandemic this year even as lockdowns are slowly eased and select economic activities restart in a ‘new normal’ scenario,” ADB chief economist Yasuyuki Sawada said in a statement.
“While we see a higher growth outlook for the region in 2021, this is mainly due to weak numbers this year, and this will not be a V-shaped recovery,” Sawada said.