The Asian Development Bank has tripled to $20bn its funding to help member states deal with the economic fallout of the coronavirus pandemic, as new research suggests the global economy is facing its worst collapse since the second world war.
Masatsugu Asakawa, president of the ADB, told the Financial Times, that the multilateral Asia-Pacific lender would further increase the funding if the downturn proves deeper and more long-lasting.
“We focused on the demand side looking at consumption and investment in China and other countries,” Mr Asakawa said. “We are now focusing on the supply side as well. If [the disruption] is worse than our projections, we will revise our outlook and, yes, it is possible to have further packages.”
The ADB expects the Asia-Pacific region to grow by 2.2 per cent this year, down from 5.2 per cent in 2019. Mr Asakawa added, however, that the IMF was expected to come up with a more downbeat forecast when it releases its own estimates later this week.
“We have to make sure the pandemic doesn’t evolve into a financial crisis,” Mr Asakawa said.
The increased funding announcement comes just weeks after the ADB announced a $6.5bn package to help countries in the Asia-Pacific region and the China-led Asian Infrastructure Investment Bank unveiled a separate lending programme worth at least $5bn.
The G20 is expected this week to offer lower income countries a moratorium on bilateral government loan repayments, to stave off an emerging markets debt crisis.
Data from the latest Brookings-FT tracking index, which compares indicators of real activity, financial markets and investor confidence with their historical averages, suggest the long-term economic consequences of the coronavirus pandemic will be profound. Researchers said the lack of a co-ordinated international response had exacerbated the negative economic impact of the health crisis.
The bulk of the $20bn ADB package will go to helping governments finance expanded budgets. But $2.5bn will be in the form of grants and concessional loans to help members procure medical equipment.
Loans will also go to financial institutions “to rejuvenate trade and supply chains”, the ADB said in a statement. Asian supply chains had already been severely disrupted by the US-China trade war before the coronavirus outbreak.
The ADB said it was working closely with other international organisations including the IMF, the UN and the World Bank. But it pointedly did not mention the AIIB.
“They are an investment bank,” said Mr Asakawa. “Do they support this kind of assistance? Do they ever offer concessional loans or grants? If so, our door is not closed.”
