MANILA, Dec. 10 (Xinhua) -- Economic activity in developing Asia is forecast to contract by 0.4 percent this year before picking up to 6.8 percent in 2021 as the region moves toward recovery from the effects of the COVID-19 pandemic, according to an Asian Development Bank (ADB) report released 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 percent gross domestic product (GDP) growth forecast in September, while the outlook for 2021 remains unchanged.

But the report said that prospects are diverging within the region, with East Asia set to grow this year while other subregions 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 subregions are forecast to contract this year.

The report said that East Asia is the exception, with an upgraded growth forecast of 1.6 percent for 2020 on the back of faster than expected recoveries in China. East Asia's growth outlook for 2021 is maintained at 7.0 percent.

The ADB expects China's economy to grow by 2.1 percent in 2020, more than the 1.8 percent forecast in September, before bouncing back to 7.7 percent in 2021, unchanged from the September Update.

"But risks on global economic recovery make the forecast uncertain," the ADB warned.

The report said that South Asia's GDP is forecast to contract by 6.1 percent in 2020, revised up from the 6.8 percent contraction expected in September. Growth in South Asia is forecast to rebound to 7.2 percent in 2021.

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

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 subregion's growth forecast for 2020 is revised down to -4.4 percent from -3.8 percent in September. The subregion's outlook for 2021 is also downgraded, with Southeast Asia now expected to grow 5.2 percent next year compared to the 5.5 percent growth forecast in September.

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

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

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

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

Oil prices are retained at 42.50 U.S. dollars per barrel in 2020 before increasing to 50.00 U.S. dollars per barrel in 2021.