Tokyo: Asia’s economic growth this year will grind to a halt for the first time in 60 years, as the coronavirus crisis takes an “unprecedented” toll on the region’s service sector and major export destinations, the International Monetary Fund said on Thursday.
Policymakers must offer targeted support to households and firms hardest-hit by travel bans, social distancing policies and other measures aimed at containing the pandemic, said Changyong Rhee, director of the IMF’s Asia and Pacific Department.
“These are highly uncertain and challenging times for the global economy. The Asia-Pacific region is no exception. The impact of the coronavirus on the region will be severe, across the board, and unprecedented,” he said.
“This is not a time for business as usual. Asian countries need to use all policy instruments in their toolkits.”
Asia’s economy is likely to suffer zero growth this year for the first time in 60 years, the IMF said in a report on the Asia-Pacific region released on Thursday.
While Asia is set to fare better than other regions suffering economic contractions, the projection is worse than the 4.7% average growth rates throughout the global financial crisis, and the 1.3% increase during the Asian financial crisis in the late 1990s, the IMF said.
Chang Yong Rhee, Director of the IMF's Asia and Pacific Department, said IMF also supports the Reserve Bank of India's policy responses to support financial stability and help the Indian economy cope with the fallout from this pandemic.
We strongly support India's policy response to the pandemic, including the fiscal stimulus package and the proactive decision to pursue a nationwide lockdown to stem the spread of the virus and to save lives, Rhee said.
The policy rate actions along with the regulatory measures to boost liquidity would provide some relief to borrowers and financial institutions, he said.
The Finance Ministry unveiled a Rs 1.70 lakh crore economic package on March 26 involving free foodgrain and cooking gas for the poor for the next three months. The Indian government has extended the ongoing nationwide lockdown till May 3 to contain the spread of the pandemic.
The economic impact of COVID-19 and related policy measures are expected to be substantial, but a recovery should take hold once the virus has been contained, he said.
The IMF expects a 7.6% expansion in Asian economic growth next year on the assumption that containment policies succeed, but added the outlook was highly uncertain.
Unlike the global financial crisis triggered by the 2008 collapse of Lehman Brothers, the pandemic was directly hitting the region’s service sector by forcing households to stay home and shops to shut down, the IMF said.
