World Bank sees outbreak taking a big toll on Asia's economy
A woman wearing a face mask walks past a fashion shop in Hong Kong, Monday, March 30, 2020. The new coronavirus causes mild or moderate symptoms for most people, but for some, especially older adults and people with existing health problems, it can cause more severe illness or death. (AP Photo/Vincent Yu)
In this photo released by Xinhua News Agency, a worker wearing a protective face mask irons clothes at a re-opened shopping mall in in Wuhan in central China's Hubei province, Monday, March 30, 2020. Shopkeepers in the city at the center of China's virus outbreak were reopening Monday but customers were scarce after authorities lifted more of the anti-virus controls that kept tens of millions of people at home for two months. (Shen Bohan/Xinhua via AP)
A man wearing a protective face mask touches the investment icon bull statue on display outside a retail and wholesale clothing mall which remain closed following the new coronavirus outbreak in Beijing, Monday, March 30, 2020. Asian shares started the week with fresh losses as countries reported surging numbers of infections from the coronavirus that has prompted shutdowns of travel and business in many parts of the world. (AP Photo/Andy Wong)
WASHINGTON (AP) — The World Bank is estimating that the cornavirus outbreak will cause economic growth to slow significantly this year in China and other East Asian-Pacific countries, throwing millions into poverty.
Under a worse-case scenario, the region could suffer its sharpest downturn since a devastating currency crisis more than two decades ago, the bank said in an updated forecast released Monday.
The bank's report projects that growth in the region would slow to 2.1% this year from 5.8% in 2019 under a “baseline” forecast in which economic recovery takes hold this summer.
But under a worse case, in which the adverse effects of the virus spillover into next year, the region’s economy would contract 0.5%, the bank estimates. That would represent the weakest performance for the region since the 1997-98 Asian currency crisis, which plunged 40% of the globe into recession.
More than 11 million people could fall into poverty in the region under the worse-case scenario, the bank estimates. That's in stark contrast to its earlier forecast that growth would be sufficient this year to lift 35 million people out of poverty.
A slowdown of the size being projected by the World Bank for such a critical part of the global economy would have severe effects for the rest of the world. The World Bank said it has not finished forecasts for other parts of the world but last week, International Monetary Fund Managing Director Kristalina Georgieva, said it is clear that the global economy has already entered a recession that could be as bad or worse than the slump after the 2008 financial crisis.
In the World Bank’s base case, China, the world’s second largest economy, would see growth slow from 6.1% last year to 2.3% this year. In the worse case scenario, growth in China would come to a near halt with a tiny 0.1% gain.
In the worse case scenario where the virus keeps disrupting activity for many more months, the negative 0.5% drop for the region would include economic declines of 2.3% in Indonesia, 4.6% for Malaysia and 5% for Thailand.
“In addition to bold national actions, deeper international cooperation is the most effective vaccine against this virulent threat,” said Aaditya Mattoo, chief economist for East Asia and the Pacific at the World Bank.
The World Bank has pledged to provide $14 billion in financial support through a fast-track package to strengthen the response of developing countries to the virus and expects to deploy up to $160 billion over the next 15 months to protect the poor and vulnerable.
The IMF has said it will commit if needed its full $1 trillion in lending resources to support nations hit by the virus.