Regional Economic Outlook for Asia and Pacific, October 2021

Regional Economic Outlook

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The publication states the Asian outlook for 2021 was downgraded by more than 1 percent to 6.5 percent compared with the April 2021 World Economic Outlook because of new peaks of the pandemic cycle driven by the highly contagious Delta variant.
The publication projects global growth of 5.9 percent in 2021 and 4.9 percent in 2022 (0.1 percentage point lower for 2021 than in the July 2021 World Economic Outlook Update).
The publication notes that advanced economies are forecast to grow 5.6 percent in 2021, led by a rebound in the US and Europe.
The publication projects that beyond 2022 global growth is projected to moderate to about 3.5 percent over the medium term.
The publication characterizes the ongoing rise in inflation as expected to be transitory, though uncertainty remains high.
The publication highlights a deepening divergence between Asian advanced economies and emerging market and developing economies, reflecting vaccination coverage and policy support, and states that medium-term output levels in emerging market and developing economies are expected to remain below pre-pandemic trends.
The publication lists risks tilted to the downside: uncertain pandemic dynamics, vaccine efficacy against virus variants, supply chain disruptions, and potential global financial spillovers from US monetary normalization in the presence of domestic financial vulnerabilities.

The publication uses novel daily data to examine determinants of COVID-19 vaccine rollouts and quantify effects of vaccinations on health and economic outcomes.
Determinants of vaccine deployment identified in the publication include:
- the severity of the COVID-19 waves in 2020,
- procurement strategies,
- local production of vaccines,
- the quality of the health infrastructure,
- vaccine acceptance.
The publication provides empirical evidence that:
- the swift and broad administration of vaccines can provide a significant boost in economic activity, with the effect increasing over time and when a larger share of population gets vaccinated;
- improvements in health outcomes are more visible when a country is in the middle of a significant outbreak and containment measures are in place;
- cross-country health and economic spillovers from COVID-19 infections and vaccine rollouts are sizable, supporting the statement that the pandemic will not be over anywhere until it is over everywhere and putting a premium on broad access to vaccines.

The publication reports that trade openness and global value chain (GVC) integration have stalled in Asia since the global financial crisis, partly reflecting a slower pace of trade liberalization.
The publication uses a novel index of trade restrictions to assess potential gains from reducing nontariff barriers (NTBs).
Empirical estimates and model-based simulations in the publication indicate that GDP could increase by about 1.6 percent five years after a major reform effort to reduce NTBs.
The publication states that a renewed push to liberalize trade can invigorate durable growth and minimize post-pandemic scarring, while noting that policies to mitigate the impact of trade reforms on inequality may be needed.

Asian outlook for 2021: 6.5 percent (downgraded by more than 1 percent versus April 2021 WEO).
Global growth: 5.9 percent in 2021; 4.9 percent in 2022.
Adjustment versus July 2021 WEO Update: 0.1 percentage point lower for global growth in 2021.
Advanced economies growth in 2021: 5.6 percent.
Medium-term global growth projection: about 3.5 percent.
Estimated GDP gain from major NTB reduction: about 1.6 percent five years after reform.

Executive Summary
- Executive Summary (Markdown version)
- Executive Summary (PDF)
Regional Economic Outlook: Asia and Pacific — October 2021
- Regional Economic Outlook: Asia and Pacific — October 2021 (Markdown version)
- Regional Economic Outlook: Asia and Pacific — October 2021 (PDF)