DISRUPTIONS brought about by the coronavirus disease 2019 (COVID-19) and lingering trade tensions will weigh on economic growth in Asia and the Pacific, according to a report issued by a United Nations (UN) agency.

The UN Economic and Social Commission for Asia and the Pacific’s (ESCAP) Economic and Social Survey of Asia and the Pacific 2020 report released Wednesday found that growth for developing countries in the Asia Pacific could slow to 3.7% in 2020 from 4.3% in 2019.

“Uncertainties about the region’s short-term economic outlook have increased considerably due to the multifaceted impact of COVID-19, which initially impaired China’s economy and has subsequently spread to other countries, impacting the region’s economies through supply, demand and financial links.”

Inflation in the region is expected to pick up to 4.8%, which the report anticipates is temporary, as consumer prices of essentials rise during the pandemic. Inflation is expected to fall to 4.2% in 2021.

UNESCAP said the region’s major trading partners are severely affected, with weakened demand from the European Union and the US impairing the region’s trade significantly.

Slower activity in the commodity markets during the pandemic is expected to hurt exporters.

“Lower commodity prices can reduce commodity exporting countries’ fiscal revenues, worsen their trade positions and put pressure on their currencies. In the region, exporters of primary commodities (excluding fuel) are vulnerable mainly due to China,” UNESCAP said.

Supply chains have also been disrupted, including those of the automobile and pharmaceutical industries.

COVID-19 has also caused declines in tourism, and countries have been suspending productive activities that may trigger capital flight and weaken currencies in the region.

The report said that trade tensions between the US and China remain the primary risk for the region’s short-term economic outlook.

Although the two countries had signed an initial trade agreement, the report said it does not address US concerns about China’s subsidies and state-owned enterprises. The report added that the trade targets are unrealistic, and enforcement of the agreement lacks a multilateral framework.

ESCAP said that the region should invest in health emergency preparedness in addition to immediate relief measures.

It also recommended the strengthening of social protections for the vulnerable in future health crises and the use of fiscal stimulus measures to help safeguard employment.

Countries affected by trade tensions should diversify trade networks, the report added.

“Multilateral cooperation is indispensable in order to address unresolved trade tensions and rising protectionism,” it added. — Jenina P. Ibañez