Economic activity in the Asia Pacific region is expected to contract by 2.2% in 2020, due to a sharper-than-expected downturn in key emerging markets, according to the Regional Economic Outlook by the International Monetary Fund.

The 2.2% expected contraction in 2020 reflects a sharper contraction, notably in India, the Philippines, and Malaysia. Bucking this trend, China’s outlook has been revised up to 1.9% for 2020 because of a faster-than-expected rebound in the second quarter, and growth is expected to pick up to 8.2% in 2021 on the assumption of a smooth handover from public sector support to private sector demand.

Asian advanced economies are expected to shrink by less than previously projected, reflecting a faster pickup in activity following earlier exit from lockdowns. Advanced economies include Australia, New Zealand, Japan, Hong Kong, South Korea, Taiwan, Singapore and Macau.

The Outlook also expects economic activity to grow by 6.9% in 2021.

The outlook varies by country depending on infection rates and containment measures, the scale and effectiveness of the policy response, reliance on contact-intensive activities, and reliance on external demand.

The IMF stated that in parts of Asia where virus transmission rates are low, mobility and activity could normalise faster than elsewhere. Scarring is likely, however, as labour market participation has fallen, and output is expected to remain below pre-pandemic trends over the medium term, with the most vulnerable in society likely to be hit the hardest.