The East Asia and Pacific region’s recovery has been undermined by the spread of the Delta variant of SARS-CoV-2, which is likely slowing economic growth and increasing inequality in the region, the World Bank said on Monday.
Economic activity began to slow in the second quarter of this year, and growth forecasts have been downgraded for most countries in the region, the World Bank’s East Asia and Pacific Fall 2021 Economic Update said.
While China’s economy is projected to expand 8.5 percent, the rest of the region is forecast to grow at 2.5 percent, nearly 2 percentage points less than forecast in April, the World Bank said.
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“The economic recovery of developing East Asia and Pacific faces a reversal of fortune,” World Bank vice president for East Asia and Pacific Manuela Ferro said.
“Whereas in 2020 the region contained COVID-19 while other regions of the world struggled, the rise in COVID-19 cases in 2021 has decreased growth prospects for 2021,” Ferro said.
The economies of several Pacific island countries and Myanmar have been hit the hardest, with Myanmar expected to contract 18 percent while Pacific island countries as a group are anticipated to shrink 2.9 percent, the World Bank said.
Myanmar would experience the biggest contraction in employment in the region and the number of poor people in the country would rise, it added.
“There is no doubt the military takeover [in Myanmar] has led to a disruption of economic activity combined with the civil disobedience movement, which means fewer people are going to work,” World Bank chief economist for East Asia and Pacific Aaditya Mattoo said.
The report estimates that most countries in the region, including Indonesia and the Philippines, can vaccinate more than 60 percent of their populations by the first half of next year.
While that would not eliminate COVID-19 infections, it would significantly reduce mortality, allowing a resumption of economic activity.
The damage done by the resurgence and persistence of COVID-19 would likely hurt growth and increase inequality in the longer term, the World Bank said.
“Accelerated vaccination and testing to control COVID-19 infections could revive economic activity in struggling countries as early as the first half of 2022, and double their growth rate next year, but in the longer term, only deeper reforms can prevent slower growth and increasing inequality, an impoverishing combination the region has not seen this century,” Mattoo said.
The World Bank said the region would need to make a serious effort on four fronts to deal with the rise in COVID-19 cases by addressing vaccine hesitancy and limitations to distribution capacity, enhancing testing and tracing, increasing regional production of vaccines and improving local health systems.
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