Manila, Dec 10 (IANS): Economic activity in developing Asia is forecast to contract by 0.4 per cent this year before picking up to 6.8 per cent in 2021 as the region moves toward recovery from the impacts of the Covid-19 pandemic, an Asian Development Bank (ADB) report said on Thursday.

The new growth forecast, presented in a regular supplement to the Asian Development Outlook (ADO) 2020 Update, is an improvement from the -0.7 per cent GDP growth forecast in September, while the outlook for 2021 remains unchanged, reports Xinhua news agency.

But the report said that prospects are diverging within the region, with East Asia set to grow this year while other sub-regions are contracting.

"The outlook for developing Asia is showing improvement. Growth projections have been upgraded for China and India, the region's two largest economies," ADB Chief Economist Yasuyuki Sawada said in a statement.

"A prolonged pandemic remains the primary risk, but recent developments on the vaccine front are tempering this," he said.

Most of developing Asia's sub-regions are forecast to contract this year.

The report said that East Asia is the exception, with an upgraded growth forecast of 1.6 per cent for 2020 on the back of faster than expected recoveries in China.

East Asia's growth outlook for 2021 is maintained at 7.0 per cent.

The report said that South Asia's GDP is forecast to contract by 6.1 per cent in 2020, revised up from the 6.8 pe rcent contraction expected in September.

Growth in the region is forecast to rebound to 7.2 per cent in 2021.

The growth forecast for India, the sub-region's largest economy, for fiscal year (FY) 2020 is raised to -8.0 per cent, from the -9.0 per cent projection in September, while the outlook for FY 2021 is kept at 8.0 per cent.

The report said that economic growth in Southeast Asia remains under pressure as Covid-19 outbreaks and containment measures continue, particularly in Indonesia, Malaysia, and the Philippines.

The sub-region's growth forecast for 2020 is revised down to -4.4 per cent from -3.8 per cent in September.

Its outlook for 2021 is also downgraded, with Southeast Asia now expected to grow 5.2 per cent next year compared to the 5.5 per cent growth forecast in September.

The outlook for the Pacific is unchanged for both 2020 and 2021 at -6.1 per cent and 1.3 per cent, respectively.

Central Asia's growth forecast for 2020 remains at -2.1 per cent, but the outlook for 2021 is slightly downgraded to 3.8 per cent from the 3.9 per cent growth projection in September.

Regional inflation is expected to marginally ease to 2.8 per cent in 2020, from the 2.9 per cent projected in September, due to depressed demand and low oil prices.

Inflation for 2021 is forecast at 1.9 per cent, down from the 2.3 per cent forecast in September.