The Covid-19 virus, inflationary pressures, geopolitical risks, and rising debt have dampened hopes for a quick economic recovery, with Asia and the Pacific economies pulled back by at least two years in their fight against poverty.
In its Key Indicators for Asia and the Pacific 2022 report released Wednesday, the Asian Development Bank said despite the resumption of economic activities that offered several reasons for optimism and the increased level of consumer demand and confidence, the impact of the pandemic was so profound it would be more challenging than before for many countries in the region to escape poverty.
“The poor and the vulnerable have been hit hardest by Covid-19, and while economies are recovering, many people may find that getting out of poverty is even more difficult than before,” said ADB Chief Economist Albert Park. “Governments in the region should focus on resilience, innovation, and inclusiveness to provide more balanced economic opportunities and greater social mobility for everyone.”
The region’s economic growth this year is expected to reduce extreme poverty — defined as living off less than $1.90 a day — to a level that would have been achieved in 2020 had the pandemic not happened. Data simulations also show that people in the region with lower pre-pandemic levels of social mobility — the ability to escape poverty—may experience longer-lasting setbacks.
In the Philippines, Moody’s Analytics forecasted the country to meet its 7-9 percent growth target for 2022 amid macro headwinds and runaway inflation.
It said the Philippines would sustain its growth momentum, expanding 8.8 percent in the year’s second quarter. The impressive performance of the country’s gross domestic product makes it among the top performing economies in the Asia-Pacific, “following four quarters of spectacular growth that have put the country on track to comfortably meet its GDP target of seven to nine percent in 2022.”
However, Covid-19 pushed the Philippines’ total outstanding debt to P12.76 trillion as of end-April 2022, equivalent to 63.5 percent of GDP, to finance the government’s pandemic response programs.
Virtuous development path
The ADB added that Asia and the Pacific need to galvanize efforts to recover from the Covid-19 pandemic. The region needs to get back on a virtuous development path.
“The latest economic statistics show divergent growth trajectories. Some economies have yet to return to their pre-pandemic growth rates, and others are doing better. Providing opportunities for upward social mobility, especially for those who faced the greatest challenges during the pandemic, is key to ensuring nobody is left behind,” the report said.
The crisis interrupted a long trend of poverty reduction in Asia and the Pacific. Although economies are recovering, progress is uneven. According to the report, the pandemic may also have worsened forms of poverty beyond income, such as food insecurity and inadequate access to health services and education.
By 2030, the prevalence of extreme poverty in the region is expected to drop below one percent. At the same time, about 25 percent of the population is projected to achieve at least middle-class status, defined as having income or consumption of $15 or more daily, adjusted for purchasing power parity.
However, this outlook is threatened by differences in social mobility and other uncertainties. Developing Asia faces the potential for stagflation, ongoing conflicts involving critical global actors, increased food insecurity, and energy price shocks.
The pandemic has provided a compelling opportunity to look at how economies can become more agile in responding to development challenges. Effective policies, developed with the help of accurate and integrated data and statistics, can move the region forward, ADB added.