Output in East Asia and Pacific (EAP) is projected to expand by 7.4% in 2021, after a sharp slowdown to 0.9 percent in 2020.
The recent forecast by the World Bank is still around 3 percentage points below pre-pandemic projections.
While China is expected to recover strongly, the level of output in the rest of EAP is expected to remain around 7.5% below pre-pandemic projections in 2022, with significant cross-country differences.
The pandemic is expected to leave lasting economic scars on the region and dampen potential growth and incomes.
The World Bank pointed out key downside risks to the outlook. The risks include the possibility of renewed outbreaks and delayed rollout of a vaccine; heightened financial stress amplified by elevated debt levels; and the possibility of more severe and longer-lasting effects from the pandemic, including persistent policy uncertainty and subdued investment.
In China, which has kept new infections at a low rate, GDP is estimated to have expanded by 2% in 2020—about 4% below potential.
The activity has been supported by a quick and sustained resumption of production and exports and additional boosts from stimulus-fuelled public investment.
The rest of the region suffered significant output losses in 2020, with significant cross-country differences.
“Making the right investments now is vital both to support the recovery when it is urgently needed and foster resilience. Our response to the pandemic crisis today will shape our common future for years to come. We should seize the opportunity to lay the foundations for a durable, equitable, and sustainable global economy”, World Bank Group President David Malpass said.
GDP in the region excluding China contracted by 4.3%, and growth in about two-thirds of the regional economies declining by more than 7 percentage points below their long-term average.
The activity has been supported by a quick and sustained resumption of production and exports, with additional boosts from stimulus-fuelled public investment.
The worst-hit economies were those with extended periods of lockdowns combined with large domestic outbreaks (the Philippines) or domestic policy uncertainty (Malaysia, Thailand, Timor-Leste), and those with a heavy reliance on tourism and travel (Fiji, Thailand, Palau, Vanuatu).
Without an effective medical treatment or vaccination, mobility continues to be limited by remaining social distancing measures and travel restrictions.
Such restrictions, along with significant income and job losses, have weakened consumer confidence, and lingering policy uncertainty continues to weigh on private spending.
In the rest of the region, the recovery is expected to be more protracted. Following last year’s contraction, output in the region excluding China is expected to expand by 4.9% in 2021 and 5.2% in 2022, to a level around 7.5% below pre-pandemic projections, with significant cross-country variations.
Vietnam was able to control the pandemic at modest human and economic costs and its exports have remained resilient despite global headwinds. The country is projected to suffer an output loss of around 4% compared to pre-pandemic projections by 2022.
In contrast, Pacific Island countries have been largely spared by the pandemic but have been devastated by the collapse in global tourism and travel. These economies are expected to remain around 9% below their pre-pandemic projected level.
The cumulative output loss over 2020-22 is estimated to be around 10% of its 2019 level. Risks are amplified by existing vulnerabilities, including high and rising public and private debt levels.