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South-east Asian countries that failed to administer Covid-19 vaccines fast enough and are suffering outbreaks of the disease are causing a growing regional economic divergence, the Asian Development Bank said on Wednesday.
The ADB cut its 2021 growth forecasts for leading economies including Thailand, Indonesia, the Philippines and Vietnam even as it raised its forecasts for China, Taiwan and South Korea.
“Regional growth paths are diverging,” the Japanese-backed multilateral bank said as it published a six-monthly update to its Asian Development Outlook for 2021.
“Economies that have successfully contained the pandemic and actively rolled out vaccines are benefiting more than others from the recovery in global demand.”
Infections caused by the Delta variant of the coronavirus have led to record outbreaks in several south-east Asian countries this year, exposing their delays in procuring vaccines and hampering manufacturing in sectors ranging from footwear to semiconductors.
The bank said recovery in several of the region’s largest economies was being held back by new waves of infections and slower progress on vaccination.
“Indonesia, Thailand and the Philippines struggled with outbreaks recently, and vaccination rates are in the vicinity of 20 per cent,” Abdul Abiad, director of the ADB’s macroeconomic research division, told the Financial Times. “The growth rates should have been stronger had they been able to vaccinate faster.”
The bank said it expected south-east Asian economies to grow on average by 3.1 per cent this year, more slowly than the 4.4 per cent it forecast when it published its previous economic outlook in April.
The ADB cut its forecast for Indonesia, south-east Asia’s largest economy, by a percentage point to 3.5 per cent and for Thailand, the second largest, by more than 2 percentage points to 0.8 per cent, compared with its earlier forecasts.
Thailand this week raised its public debt ceiling to 70 per cent, from 60 per cent, to allow the government to borrow more in response to the pandemic, which has hit its tourism-dependent economy especially hard.
In Vietnam, formerly one of Asia’s fastest growing economies, where an outbreak of the Delta variant concentrated in Ho Chi Minh City has crippled business, the ADB slashed its growth forecast to 3.8 per cent, from 6.7 per cent.
However, the bank lifted its forecast for Singapore, which has vaccinated about 80 per cent of its population, by half a percentage point to 6.5 per cent.
And it upgraded its forecast for “developing” east Asia, which includes China and South Korea, by 0.2 points to 7.6 per cent.
The ADB said risks to regional economies remained “tilted to the downside”, and included new virus variants, slower than expected vaccine rollouts and possible geopolitical tensions.
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