The International Monetary Fund downgraded its 2021 economic growth forecast for emerging Asia because of the spread of coronavirus variants and the slowing of vaccinations in the region.
The organization said these factors have clouded Asia's recovery prospects - which were much more positive at the start of the year.
However, the fund upgraded its forecast for advanced or developed nations.
While developed nations have had some success in accelerating their economic recovery and mitigating the spread of new strains, developing nations are still struggling, the organization said.
"Growth prospects in India have been downgraded following the severe second Covid wave during March-May and expected slow recovery in confidence from that setback. Similar dynamics are at work in the ASEAN-5 group...where recent infection waves are causing a drag on activity," the International Monetary Fund said.
In the latest update to its World Economic Outlook report, the fund projected the growth of emerging Asia nations to be at around 7.5% - a 1.1% drop from its previous projection. The update was the largest downgrade made by the organization for emerging economies worldwide.
India received the largest downgrade, with a 3.0 decrease to 9.5%. The fund's projection for the ASEAN 5 group, which includes Indonesia, the Philippines, Malaysia, Thailand and Vietnam, was decreased by 0.6 points to 4.3%.
The fund downgraded its 2021 forecast for China's economic growth. The organization cut 0.3 points from its projections to 8.1% and blamed the slowing of government spending and fiscal support.
The fund said Southeast Asia was now the world epicenter for the more contagious Delta variant. The organization said its rapid spread had forced countries to reimpose travel bans and lockdown measures, which will drastically slow economic recovery.
"We expect renewed virus outbreaks and a subsequent retightening in restrictions to delay the economic recovery, particularly in Southeast Asia," analysts at Oxford Economics said.
Analysts said the slow vaccination rate in Southeast Asia also left many economies vulnerable. They said projections might be downgraded if further setbacks occur in coming months.
