China to overtake US economy by 2028-29 in covid’s wake: JCER
The Chinese economy is likely to surpass that of the U.S. in either 2028 or 2029, as the Asian giant emerges from the coronavirus pandemic in a position of strength, a new study by the Japan Center for Economic Research shows.
The nonprofit organization’s sixth annual report on medium-term forecasts — released on Thursday and titled “Asia in the coronavirus disaster: Which countries are emerging?” — looks at the impact of COVID-19 across 15 Asia-Pacific economies through 2035.
It covers two main scenarios: a “baseline” or standard scenario, in which the crisis is a transient event like an earthquake, and an “aggravated” scenario that wreaks havoc on structural trends such as globalization, urbanization and innovation. Either way, China’s quick success at containing the virus is expected to help it top the U.S. by the end of this decade.
“Due to the impact of the novel coronavirus, many countries are expected to suffer deeply negative growth rates for 2020. But while COVID-19 infections have spread to nearly every country worldwide, not all of them have been affected to the same degree,” the report notes. “The differences seen now will make a considerable difference to countries’ economic scale 15 years from now.”
In 2020, only China, Vietnam and Taiwan are on track to maintain positive year-on-year growth rates. India’s rate is likely to be negative by more than 10 percent, while the Philippines is expected to see a contraction of more than 8 percent. Hong Kong, Thailand, Canada, Malaysia and Singapore are all facing gross domestic product shrinkage of more than 6 percent.
But JCER’s baseline scenario assumes that in four to five years, key economic variables return to trends seen before the global health crisis.
Despite China’s economic slowdown in recent years, due to demographic challenges and declining investment, its economy is still forecast to be growing at a roughly 3 percent clip in 2035. In the U.S., sluggish productivity is seen holding the growth rate to about 1 percent in 2035.
JCER’s standard scenario envisions China overtaking America in 2029. And by 2035, China’s economic scale, including Hong Kong, would reach $41.8 trillion — only slightly less than the combined scale of the U.S. and Japan at that point, at $42.3 trillion.
China is poised to become a high-income country even earlier, in 2023, and its income per capita should reach $28,000 in 2035 — comparable to Taiwan’s figure but still shy of the Chinese government’s assumed target of $30,000.
The baseline scenario also paints a bright picture for Vietnam, which is seen maintaining a growth rate of about 6 percent in 2035, thanks to strong exports. This would propel the Vietnamese economy past Taiwan’s in 2035 in terms of scale, and make it the second-largest economy in Southeast Asia after Indonesia. Vietnam is poised to achieve upper middle-income status in 2023, with income per capita approaching $11,000 in 2035.
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Taiwan forecasts the economy to expand 3.83 pc in 2021
Taiwan’s economy is set for strong growth in 2021 after bucking a global downturn this year thanks to demand for its hi-tech products during the coronavirus pandemic and investment returning from China due to Sino-US trade friction.
While growth is expected to return to much of the world next year, Taiwan is likely to be one of the few economies that expands in both 2020 and 2021.
The government’s Directorate-General of Budget, Accounting and Statistics has forecast gross domestic product (GDP) to expand 2.54 percent this year and 3.83 percent in 2021, despite the global economic shocks from the Covid-19 pandemic.
The self-ruled island is expected to enjoy brisk shipments of consumer electronics, including PCs, gaming devices, 5G mobile phones and computer chips, as lockdowns and fears over the spread of the coronavirus mean people go out less often, analysts and officials said.
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ADB expects Indian economy to contract at a slower pace of 8pc
The Asian Development Bank on Thursday said the Indian economy will contract at a slower pace of 8 percent against its earlier estimate of 9 percent in FY21 on the back of a faster recovery in Asia’s third-largest economy following the easing of covid restrictions.
“The earlier South Asia forecast for 6.8 percent contraction is upgraded to 6.1 percent in line with an improved projection for India, as recovery accelerates, from 9 percent contraction to 8 percent. Growth will return in 2021, at 7.2 percent in South Asia and 8 percent in India,” ADB said in a supplement to its Asian Development Outlook.
The Indian economy contracted by 23.9 percent in the June quarter of FY21 and “began to normalize after containment measures started to ease in June”. Economic contraction in the September quarter narrowed to 7.5 percent, better than expected, ADB said.
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Malaysia economy sees smaller contraction in q3 on easing covid-19 curbs
Malaysia’s economy shrank by less than expected in the third quarter from a year earlier as consumers increased spending and businesses resumed activity after the government eased some coronavirus curbs, the central bank said on Friday.
The economy fell 2.7 percent in the July-September period, by less than the 3.2 percent fall forecast in a Reuters poll. Gross domestic product (GDP) dropped 17.1 percent in the second quarter, marking the country’s first economic contraction since the 2009 global financial crisis.
The economy improved significantly in the third quarter as businesses and employment picked up, providing a boost for domestic spending and activity across most sectors, Bank Negara Malaysia said.
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Philippines to be the Asia’s worst performer in 2020
HE PHILIPPINES is seen to post the worst economic performance in Southeast Asia this year, according to the Asian Development Bank (ADB) which slashed its growth forecast anew as household consumption and investments remained sluggish amid the coronavirus pandemic.
In its Asian Development Outlook (ADO) Supplement report released Thursday, the ADB now expects Philippine gross domestic product (GDP) to contract by 8.5 percent from -7.3 percent penciled in September. The revised forecast was at the lower end of the 8.5-9.5 percent slump projected by the Philippine government’s economic team.
“The GDP forecast for 2020 is downgraded to 8.5 percent contraction because household consumption and investment have fallen more than expected,” the multilateral lender said.
The Philippines will likely see the sharpest annual GDP drop in Southeast Asia, behind Thailand (-7.8 percent), Singapore (-6.2 percent), Malaysia (-6 percent), and Indonesia (-2.2 percent). Only Vietnam is expected to grow this year with 2.3 percent GDP, revised upward from the original 1.8 percent forecast.
Aside from the Philippines, the ADB also downgraded the outlook for Indonesia (-2.2 percent from -1 percent, previously) and Malaysia (-6 percent from -5 percent), as pandemic containment efforts continued to hamper economic recovery.
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EU extends Russia’s economic sanctions by six months
European Union leaders on Thursday extended punishing economic sanctions against Russia over the conflict in Ukraine for another six months, an EU spokesman said.
The sanctions, which target whole sectors of the Russian economy including its valuable oil businesses, were extended to mid-2021.
The measures over Russia’s role in the conflict were first imposed after Malaysian Airlines flight MH17 was shot down over rebel-held eastern Ukraine in 2014 and have been renewed every six months ever since.
The EU insists the 2015 Minsk accords must be fully implemented before relations can be normalised.
The accords, endorsed by both Moscow and Kiev, aim to end the fighting and find a political solution for Ukraine’s separatist regions of Donetsk and Lugansk.
Thousands have been killed since pro-Russia militias in eastern Ukraine launched a bid for independence in 2014, kicking off a conflict that deepened Russia’s estrangement from the West.
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Singapore economy tipped to grow 5.5pc in 2021; vaccines could push growth higher
Singapore’s economy will grow by 5.5 percent in 2021 to end the nation’s worst recession ever, induced by the coronavirus pandemic, according to a central bank survey of professional forecasters.
The pace of growth can be even higher if the pandemic is contained by a successful deployment of vaccines worldwide, they said.
The prediction made by 23 economists and analysts in the Monetary Authority of Singapore (MAS) quarterly survey was unchanged from the previous forecast made in September.
However, their forecast range for 2021 growth narrowed to 5 percent to 5.9 percent from 4 percent to 5.9 percent, the MAS survey report released on Wednesday (Dec 9) showed.
The private forecast comes after the Ministry of Trade and Industry (MTI) in November forecast growth rebounding by 4 percent to 6 percent in 2021 – the most since at least 2011 when the economy expanded by 6.3 percent.
For 2020, the private forecasters expect gross domestic product (GDP) to decline by 6 percent, also unchanged from the previous survey. That compares to MTI’s forecast of a 6.5 percent to 6 percent contraction in 2020.
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S&P downgrades Sri Lanka’s rating on rising external financing risks
Global rating agency Standard and Poor’s has downgraded Sri Lanka’s sovereign credit rating from ‘B-‘ to ‘CCC+’ on rising external financing risks and fiscal deterioration.
With the implementation of expansionary budget measures in Sri Lanka, the country’s fiscal position is expected to deteriorate materially over the next few years in the absence of favourable economic and financial conditions, S&P said in a statement.
Existing funding support from official sources does not appear sufficient to cover financing needs. This means that Sri Lanka may need external commercial funding, which can be difficult and costly.
The outlook is stable, reflecting the risks of external deterioration balanced against accommodative policies over the next 12 months. Risk of external deterioration is partially offset by accommodative policies that are likely to boost domestic demand recovery.
The risks to debt servicing capacity have risen, as the government’s access to external financing has become increasingly dependent on favourable business, economic, and financial conditions.
The downgrade stems in part from the impact of Covid-19, which has significantly narrowed the government’s fiscal space and its capacity to generate earnings through sectors such as tourism, S&P said.
The latest expansionary budget measures are likely to further weaken the government’s fiscal position. High fiscal deficits and excessive domestic liquidity will put downward pressure on the exchange rate and worsen the risks associated with the government’s already-high debt burden.