The Asian Development Bank estimates that the world economy could register up to a $4.1 trillion drop and warned that even such dire forecasts could face revisions for the worse.

«The estimated impact could be an underestimate, as additional channels such as supply disruptions, interrupted remittances, possible social and financial crises, and long-term effects on health care and education are excluded from the analysis,» said the ADB in its latest 2020 economic report.

For now, its outlook estimates that between $2 to $4.1 trillion could be lost in 2020, or 2.3-4.8 percent of global GDP. It also estimates a 4.6-5.1 percent loss to the Chinese economy and a 1-2.2 percent loss for emerging Asia ex-China.

Expected Asia Rebound

Despite a weakened outlook from what the ADB called the «worst pandemic in a century», it remains optimistic about the longer-term.

Although developing economies in Asia will suffer a sharp 2020 slowdown, 2021 growth is expected to reaccelerate to 6.2 percent, led by East Asia’s 6.5 percent. South Asia’s 2021 economy is also expected to bounce back to 6 percent, broadly tracking the dominant Indian economy.

Southeast Asia and Pacific economies are expected to suffer the worst, with the former tracking China’s economy to post 1 percent growth in 2020 followed by 4.7 percent in 2021. Pacific economies as a whole are expected to post a 0.3 contraction followed by a modest 2.7 percent rebound especially due to heavy reliance on tourism and commodities.

More Innovation

The ADB added that it precisely such an adverse environment that demands even more innovation, highlighting five drivers 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.

«Asian countries must first get the basics right because there are no shortcuts to an innovation society,» said Yasuyuki Sawada, ADB’s chief economist.

«For example, strikingly, one in three 10-year-old Asians cannot read adequately. This suggests that the education systems of lagging countries must be strengthened and reformed. The journey toward a more innovative Asia thus requires long-term commitment and a lot of hard work.»