China will be only one of a fortunate few Asian countries to see economic growth this year while others in the region will see their economies shrink to a larger degree.
The International Monetary Fund upgraded its 2020 growth forecast for China to 1.9% from its June estimate of 1% because of "a faster-than-expected rebound in the second quarter." Its latest "Regional Economic Outlook report for Asia and Pacific" said China's economic growth should accelerate to 8.2% in 2021.
"After hitting a trough in February 2020, China's growth received a boost from infrastructure, real estate investment and a surge in exports, mainly of medical and protective equipment, as well as work-from-home-related electronics," said the International Monetary Fund in its report.
"This is being followed by a gradual recovery in private nonhousing investment and consumption."
Economic activity in other Asian countries is moving at "multiple speeds," which is a slowdown in many cases. The International Monetary Fund said Asia's economic contraction this year will be worse than it previously estimated.
The downgrade was caused by the sharper economic slowdown in several emerging markets due to the economic paralysis created by COVID-19. As a consequence, the International Monetary Fund said Asia's economy will suffer its worst recession on record this year.
As a whole, Asia is forecast to shrink by 2.2% this year, said the International Monetary Fund. This revised estimate is far worse than the International Monetary Fund's forecast for a 1.6% contraction it made in June.
Jonathan Ostry, International Monetary Fund acting director for the Asia and Pacific department, called the 2.2% forecast "the worst outcome in living memory."
The International Monetary Fund said the downgrade for Asia "reflects a sharper contraction, notably in India, the Philippines and Malaysia."
It said India and the Philippines experienced a "particularly sharp" plunge in economic activity in the second quarter, "given the continued rise in virus cases and extended lockdowns."
India's gross domestic product is expected to shrink by 10.3% in the fiscal year ending March 31, 2021. That's more than double the 4.5% contraction forecast in June.
The Philippines' economy is forecast to contract 8.3% in the calendar year 2020 compared to the 3.6% contraction projected in June.
The International Monetary Fund said Malaysia's economy will likely shrink by 6%, which is worse than the International Monetary Fund's June forecast of a 3.8% contraction.
The immediate future for Asia outside of China will remain bleak. The International Monetary Fund pointed out Asia's economic output will likely remain below pre-pandemic levels for some time due to what it termed "scarring effects."
It said these scarring effects are the medium- to long-term damage to economies following a severe shock caused by COVID-19. One of these scars is the fear of infection and social-distancing measures are destroying consumer confidence. The hesitation to spend will keep economic activity below capacity until a vaccine is developed.
Unemployment in region is deteriorating "much more" when compared to the Great Recession of 2008. It's jumped among women and younger workers.
Despite these hurdles and others as formidable, Asia's economy is expected to rebound by 6.9% in 2021. This figure is an upgrade of the International Monetary Fund's June forecast of a 6.6% expansion.
