The World Bank on Tuesday said developing economies in East Asia and the Pacific (EAP) recovering from trade tensions and struggling with COVID-19, now face the prospect of a global financial shock and recession.
Despite sound macroeconomic policies and prudent financial regulation having equipped most EAP countries to deal with normal tremors, it is still not enough to prevent these economies from getting in turmoil, said the bank's statement.
"Countries must take action now -- including urgent investments in healthcare capacity and targeted fiscal measures -- to mitigate some of the immediate impacts," it warned.
Noting that in volatile times such as these making precise growth projections are unusually difficult, the bank presented both a baseline and a lower case scenario for EAP region.
"Growth in the developing EAP region is projected to slow to 2.1% in the baseline and to negative 0.5% in the lower case scenario in 2020, from an estimated 5.8% in 2019."
As for growth in China , it is projected to decline to 2.3% in the baseline and 0.1% in the lower case scenario in 2020, from 6.1% in 2019.
- 11M more pushed to poverty
According to the bank, the COVID-19 shock will also have a serious impact on poverty.
It estimates that under the baseline growth scenario, nearly 24 million fewer people will escape poverty across the region in 2020.
"If the economic situation were to deteriorate further, and the lower-case scenario prevails, then poverty is estimated to increase by about 11 million people," it added.
Prior projections predicted that nearly 35 million people would escape poverty in EAP in 2020, including over 25 million in China alone.
"Containment of the pandemic would allow for a sustained recovery in the region, although risks to the outlook from financial market stress would remain high," the bank said.
Countries in the region that were already coping with international trade tensions and the repercussions of the spread of COVID-19 in China are now faced with a global shock, said Victoria Kwakwa, vice president for EAP at the bank.
The good news is that the region has strengths it can tap, but countries will have to act fast and at a scale not previously imagined, she added.
“In addition to bold national actions, deeper international cooperation is the most effective vaccine against this virulent threat," said Aaditya Mattoo, chief economist for EAP at the World Bank.
She noted countries in EAP and elsewhere must fight this disease together, keep trade open and coordinate macroeconomic policy.
Among the actions recommended by the Bank are urgent investments in national healthcare capacity and longer-term preparedness.
It is suggested that taking an integrated view of containment and macroeconomic policies.
Targeted fiscal measures -- such as subsidies for sick pay and healthcare -- would help with containment and ensure that temporary deprivation does not translate into long-term losses of human capital, the bank said.
By Aysu Bicer