Growth in the Asia region is expected to slow sharply to 2.2% in 2020, under the effects of the current health emergency and then rebound to 6.2% in 2021.
Excluding Asia’s high-income newly industrialized economies, growth will drop from 5.7% to 2.4% this year before recovering to 6.7% next year. Headline inflation accelerated in 2019 as food prices edged up but remained low by historical standards. Inflation will climb further to 3.2% in 2020, but declining food prices in the latter half of the year will set the stage for easing inflation in 2021. Downside risks to the outlook are severe, most notably from COVID-19.
In these difficult times, when challenges to growth abound, innovation is critical to inclusive and environmentally sustainable growth. While some economies in developing Asia are near or at the global innovation frontier, many others lag behind. The report identifies five key drivers of innovation that should inform policy: sound education systems, innovative entrepreneurship, conducive institutions, deeper capital markets, and dynamic cities that bring together top universities and forward-thinking firms.