ISLAMABAD: On Thursday, in its supplement to the Asian Growth Outlook, the Asian Development Bank (ADB) reported that economic activity in South Asia began to normalise in the third quarter and that the economy of Pakistan is recovering, particularly in the fields of manufacturing and construction.
In line with an enhanced estimate for India, the previous South Asia outlook for 6.8 percent contraction is upgraded to 6.1pc as recovery accelerates, from 9pc contraction to 8pc. Development, according to the supplement, will return in 2021, at 7.2pc in South Asia and 8pc in India.
Agriculture is resilient in Afghanistan, but opportunities are adversely affected by the latest Covid-19 wave and escalated violence, even as peace talks begin. As Covid-19 outbreaks renew in major export destinations, economic activity in Bangladesh has recovered more strongly than expected, with both exports and remittances increasing in recent months but threatened by external threats.\
In Bhutan, after a national lockdown in August and September halted all economic activity, the effect of Covid-19 is now anticipated to be greater than predicted in the update. In October, Maldives resumed further international flights, but the demand for travel remains poor as sanctions are re-established in major European markets, hampering the recovery of tourism.
South Asia outlook improves as contraction forecast revised down to 6.1pc
Since September, Nepal has significantly eased restrictions, but a steady spike in Covid-19 infections is holding back demand.
Economic recovery was underway in the third quarter in Sri Lanka, but a quickly expanding outbreak at the beginning of October brought local lockdowns and bans, their economic impact compounded by resurgent outbreaks in the major export and tourism sectors of Sri Lanka. In 2020, these variables are expected to accelerate contraction.
Developing Asia is now expected to contract by 0.4pc in 2020, less than the 0.7pc contraction envisaged in the Asian Growth Outlook 2020 Update in September. Development in 2021 will recover to 6.8pc, but prospects within the area are diverging, it states.
As it can derail recovery and disrupt peace in some economies, a protracted pandemic is still the biggest danger to the outlook. This risk is offset by recent advances in the production of vaccinations, but vaccines need to be not only safe and reliable, but also uniformly distributed in a timely manner in order for developed countries to distribute the benefits equitably.
Another danger is the escalation of geopolitical tensions, particularly the increased conflict over trade and technology between the US and China. More predictability and multilateral approaches to managing conflicts between the world’s two largest national economies may result from recent US election results, but complete reconciliation would be a challenge.
Most economies have tended to loosen containment policies amid the relentless spread of Covid-19, having found tight lockdowns to be economically unsustainable. Containment rate heterogeneity represents the status of outbreaks in multiple economies. In Northern, South and Southeast Asia, where outbreaks have persisted in some economies and re-emerged in others, containment remains relatively serious. In East Asia and the Pacific, where outbreaks are controlled or absent, containment is less strict.