The financial crisis will hit Asia hard

The financial crisis will hit Asia hard

The economic growth is put on hold this year due to the pandemic. Asia is on its way to establish a negative record for the first time in 60 years.

Being the starting point of a pandemic wasn’t enough, as Asia got terrible news from the International Monetary Fund on Thursday. The report released by IMF paints a gloomy picture of the economic future of the continent. There is a high chance of zero growth in 2020 for the first time in 60 years.

It comes as a shock, because through every crisis the world faced, Asia managed to grow, as it happened during the Asian financial crisis in 1997 when it rose 1.3% and 4.7% in 2008-2009 global crises.

Before the pandemic, China was the one who had outstanding growth, and by extension, Asia. But now, the continent can't rely on it, as the forecast made by IMF is of only 1.2%, down from the 6% forecasted by the IMF in January.

Some other countries are facing the same fate: Japan’s economy will shrink by 5.2%, South Korea’s will drop by 1.2%, and Indonesia, Thailand, Malaysia, Singapore, and the Philippines will overall contract by 1.3%. On the other side, India's economic growth can reach 1.9%.

“While there is huge uncertainty about 2020 growth prospects, and even more so about the 2021 outlook, the impact of the Coronavirus on the region will — across the board — be severe and unprecedented,” Chang Yong Rhee, director of the Asia and Pacific Department at the IMF, wrote.

But an overall expansion of 7.6% is in sight for Asia next year. Although some countries injected money in their economies to keep them afloat, this move is frowned upon because it might not be a viable solution in the long run.

Experts believe that governments should focus on helping small and medium businesses so that a dramatic increase in unemployment won't happen. Also, giving money to households is not a solution.

Regardless of this, the Japanese prime minister considers making cash payouts to all citizens. This move comes after he decided to put the whole country under lockdown.

The prospects don't look too promising in other parts of the world, either. The global economy is said to shrink by 3% in the best-case scenario. European economic growth will collapse by 7.5%, while the U.S will shrink by 5.9%.


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Sources: cnbc.com, reuters.com, forexlive.com

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The information presented herein is prepared by CAPEX.com and does not intend to constitute Investment Advice. The information herein is provided as a general marketing communication for information purposes only and as such it has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

Therefore, Key Way Investments Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance is not a reliable indicator of future results.