The onslaught of COVID-19 halted the region’s economies, impacting lives and livelihoods. Many believed at the time that the pandemic will pass soon and normalcy will return.
More than two years have passed, and the pandemic continues. The situation has worsened with the emergence of the Omicron variant which has severely impacted the recovery prospects of China, the region’s economic powerhouse.
Disruption brought about to global supply chains, coupled with the effects of the ongoing war in Ukraine is further hampering recovery in the region.
A recent supplement published by the Asian Development Bank, explains why developing Asia is now projected to grow more slowly.
Vaccine progress uneven
Vaccination against the COVID-19 virus is critical, but countries in the region portray a mix bag of vaccine administration. Understandably developing economies are lagging behind, while vaccine administration in developed economies such as Singapore, China and South Korea are high.
Exhibit 1: Percentage of people vaccinated against COVID-19, vaccination and boosters
Although vaccine progress is uneven in the region, levels of daily new cases have subsided as compared with the global average.
Exhibit 2: Daily new COVID-19 cases, 7-day moving average
Reopening equals recovery
The region was also quick to reopen its economy amid the pandemic debacle. Countries in the region understood they could not afford to shut its borders for long. Reopening in most parts of the region has allowed for a noticeable rise in economic activity.
Exhibit 3: Purchasing managers’ index (>50 improving; <50 worsening)
The positive recovery in the region is overshadowed by uncertainty owing to the unprovoked war by Russia on Ukraine, which has sent the global gas prices soaring, leading to headline inflation around the world.
On a positive note, inflation levels in developing Asia remains low compared with the rest of the world.
Exhibit 4: Headline inflation around the world
The report estimates that growth prospects in the region will pick up, albeit at a slower pace. Growth in East and South Asia will be weaker than elsewhere in the region.
Exhibit 5: GDP growth outlook, %
Risks remain elevated in the region and another sharp oil price hike may send headline inflation to rise sharply, greatly disrupting the prospects of economic recovery in the coming year.