By APD writer Alice

The International Monetary Fund (IMF) said on April 16 that Asia’s economic growth will stand at zero this year, the rate that has not been seen for the last 60 years, as the COVID- 19 pandemics is forecast to cause unprecedented damage to the service sector and main export markets of the region.

According to the IMF's report on Asia-Pacific regional economic outlook, although Asia has the foundations for better growth than other regions in the current period, the projection is even lower than the average increase of 4.7% recorded during the global financial crisis in 2008 and a 1.3% rise during the Asian financial crisis in the late 1990s.

By 2021, the IMF expects the Asian economy to grow by 7.6% if its policies to contain the disease are successful. But the organization noted the outlook is still very uncertain.

Unlike the global financial crisis stemming from the 2008 collapse of Lehman Brothers, the COVID-19 pandemic has directly attacked the region's service sector by forcing households to stay at home and stores to shut down. Asia's export powerhouses are also suffering from falling demand for their goods, as important trading partners such as the US and Europe are facing numerous difficulties.

The IMF report predicted that the Chinese economy will grow 1.2% this year, a sharp decline from the figure of 6% estimated in January due to weakening exports and damage to domestic economic activity caused by travel restrictions that the country has ever applied.

But the IMF said the world's second-largest economy is expected to recover by the end of this year. However, there are still risks to China's growth outlook, as the virus could return and delay the normalization of the economy.

Speaking during an online meeting announcing the report, Changyong Rhee, director of the lender’s Asia and Pacific Department, said that policymakers must offer targeted support to households and firms hardest-hit by travel bans, social distancing policies and other measures aimed at containing the pandemic.

The IMF also called on governments to provide ample liquidity to markets and ease financial stress faced by small- and medium-sized enterprises.

In addition, emerging economies in the region should tap bilateral and multilateral swap lines, seek financial support from multilateral institutions, and use capital controls as needed to battle any disruptive capital outflows caused by the pandemic, it said.

Earlier on April 14, in its first World Economic Outlook report since the pandemic shut major economies, the IMF estimated global gross domestic product will shrink 3% this year, down from the 3.3% expansion it forecast in January.

According to Rhee, Asia will only rebound when there’s a global recovery. Containing the virus will be crucial.

“It would be very difficult to imagine that Asia can recover on its own,” he stressed.

(ASIA PACIFIC DAILY)