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  • Writer's pictureMelo Acuna

Pandemic may alter supply chain

COVID-19 pandemic to affect developing countries

MANILA – Asian Development Bank revised developing Asia’s growth this year to 2.2% for 2020 as it expressed optimism a rebound is possible to 6.2% by next year.

“The downturn will leave no economy untouched,” said Yasuyuki Sawada, Asian Development Bank’s chief economist in a teleconference Friday morning. He added the region’s two largest economies, People’s Republic of China and India, reports slow growth substantially this year as will most of other regional economies.

He added the inflation will rise to 3.2 this year due to rising food prices in China and India before it eases to 2.3R next year. The risks around the current focus are extremely large due to the uncertain evolution and and effects of COVID-19 pandemic.

“The environment is changing very rapidly and ADB will update its focus as needed,” he explained. Mr. Sawada said innovlation will be an important requirement to assure everyone of faster growth though it requires sound education systems, innovative entrepreneurship, conducive institutions, deeper capital markets and dynamic cities.

GDP growth in developing Asia is projected to fall from 5.2% in 2019 to 2.2% which is 3.3 percentage points below the Bank’s 2020 focus from September last year. It is expected to rebound to 6.2% next year as soon as the region recovers and COVID-19 outbreak is contained.

Without the newly-industrialized economies, ADB said growth in the region is expected to slow down from 5.7% last year to 2.4% this year before it accelerates to 6.7% next year.

Replying to questions from the media sent to ADB before the briefing, Mr. Sawada said “no economy in Asia will escape unscratched from a pandemic of this massive magnitude.” He added the more open economies, the more tourism-dependent economies actually will be hardest hit and may include Maldives, Cambodia, Fiji and Thailand. He explained all sectors of the economy will be affected to one degree or another as tourism-dependent sectors like food services and transport sectors due to falling prices of oil and other commodity will be hit although Manufacturing may bounce back once the pandemic is over.

“The crisis started as a health crisis not a problem in economies. Rather overall Asia and global economies already picked-up, towards the end of last year,” he added. He explained the pandemic could turn into a financial crisis if not quickly contained.

Asked if the pandemic would trigger a US$4 trillion impact on the global economy, Mr. Sawada said it is possible should the pandemic last six months and spill over to the broader economy.

“I think the less-development economies with weak health systems or that are struggling to contain local outbreaks can se severe economic impact,” he added. The ongoing pandemic will probably lead permanent scars on the global economy which includes a retreat from globalization.

Asked of COVID-19’s impact on the supply chain, Mr. Sawada said the pandemic can fundamentally change the global economy.

“The supply chain can be permanently interrupted, and there could be a retreat from globalization and regional integration,” he explained further. Asia will encounter the ill effects of such a situation because the region has profited from open economy and liberal trade.

Mr. Sawada further said the people’s consumption behavior may change permanently because “people are becoming more precocious” with businesses may change their investment behavior and allocating some more investment to non-productive purposes to handle and prevent the pandemic disaster. (Melo M. Acuña)

Asian Development Bank Chief Economist Yasuyuki Sawada. (Screen grab from ADB Outlook 2020 Presentation)

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