Asian economies were hit hard due to COVID-19. The fast-growing countries saw a dramatic drop in their growth chart. South and Southeast Asia’s export-oriented and heavily tourism-dependent countries found their world market share shrank, so did their domestic economies. Except for China, all major economies faced a sharp decline worldwide. However, now the vaccine is at the doorsteps and Asia is once again in the path of growth. Experts hope by 2022, Asian economies will recover the prowess they had before the virus came. Projected growth for 2021 is 6.9%. It’s a fast growth, but pre-pandemic level prosperity is yet to be achieved. Experts suggest the recovery of Asia is due to its strong and effective containment policies.
A RECOVERY SLOWER THAN EXPECTED
It was expected that Asian economies will regain their pre-covid growth by 2021, but a joint census conducted by Nikkei and The Japan Center for Economic Research collected answers from 38 analysts and economists from some of the biggest ASEAN members and India shows likewise. Economists think the recovery solely depends on the vaccination programs that could effectively end the pandemic for good. The study was conducted from November 20th to December 14th. Some of the biggest of the Asian economies – Indonesia, Malaysia, Philippines, Singapore, Thailand, and India; all are expected to go in regrowth phases, but not as soon as expected. From April to June in 2020, these countries saw their biggest drop in economic activities. ASEAN members’ GDP growth was projected as -5% in 2020 and 4.3% in 2021.
However, a solid forecast is difficult given the availability of vaccines is still debatable, and growth is dependent mainly on this sole factor. Though everyone agrees the 2021 growth will be on a positive scale, therefore contraction won’t be a problem, but the recovery will be weak and uncertain. And surely won’t reach the pre-pandemic level at least not in 2021.
However, compared to European, South, or North American economies, Asia performed way better than expected. Some lessons are to be learned from them. Early public health measures, relaxation of containment after the first wave of the virus has created a somewhat positive impact for Asia. Asia’s fiscal support policy also brought praiseworthy results. More than a dozen Asian countries recently signed the regional comprehensive economic partnership, a plan that will boost the continent’s economic growth further.
SOME CASE STUDIES
Thailand, a major economy of Southeast Asia is recovering slowly. Though its GDP contraction fell from 12% to 6% by the end of 2020, full recovery is still a long way to go. The Asian economy introduced several schemes to help its small and medium industries but comparatively difficult debt relief and stimulus packages didn’t offer the smooth recovery that the country wants. Unemployment is around 8 lakh and household income is yet to reach the pre-covid scale. More than $13.3 billion has been allocated for the recovery of various sectors, though key drivers like tourism are lacking strong performance. It will be safe to say for Thailand, the pre covid level economy will return after the first half of 2022.
Indian GDP growth slumped to -23.9% in the April-June period of 2020. Now with the easing of restrictions, the world’s third-largest economy by PPP measures is recovering, though inflation still poses a risk. India is finding it difficult to cope with COVID-19 induced economic crises. Government steps to accelerate agricultural output can bring positive results, but a lot more has to be done concerning its massive informal sectors. For example, foreign investment flow is needed to grow. All the eyes look out to China, the country was the only one with positive growth even during the pandemic. As of 2021, the growth is 1.9%. Its manufacturing industries are key drivers for neighboring economies. Retail sales have also seen positive changes in 2020. However, China alone can’t drag other countries to the path of recovery.
Tensions in the pacific, weak global growth, various restrictions are key obstacles that require worldwide restructuring steps to be taken.
Advanced economies like Japan showed impressive regrowth. Its economy began to expand by September 2020. Japan announced the highest financial stimulus, which counts for around 40% of its GDP. This is the highest in the world and reflects the country’s strong will to recover from the virus-induced negativities.
ASEAN countries like Malaysia, Indonesia, or the Philippines are recovering, but slowly. Compared to them, the North Asian nations of Japan, Korea are experiencing much better growth, thanks to their proximity to China. Vietnam remains an impressive performer concerning COVID-19 related issues. The country contained the virus and is now likely to register a positive GDP growth in 2021, thanks to the US-China trade war. Indonesia has been experiencing modest economic growth for years. They have relieved some public debt. This, along with land and tax reforms, the Indonesian government will likely face growth in 2021, but the country still falls short of full recovery.
Cambodia, the Philippines, and other countries are also struggling to reach pre-covid level growth. New infrastructure plans in the Philippines and Indonesia will also help to boost positive growth. Malaysia’s growth depends on its policy, practice, and the pandemic. The government expects exports to boom and tourism to flourish, but the global trend is not keeping up with the enthusiasm that would have helped Malaysia to recover by 2021.
Let’s have a look at West Asia. The region forecasts a modest recovery with a growth of 4.7%, not enough to recover from the damages induced by the virus. West Asian economies on average contracted by 3.8% in 2021. Its recovery solely depends on the global energy market and tourism, both of which slumped around the world and yet to show any positive growth. Experts expect these sectors to reach pre-pandemic levels in 2022, domestic demand will also remain sluggish in West Asia. Greater debt financing is a must, which is not likely to happen in Asia’s developing states.
The governments are already planning to roll back the fiscal support policies, which can lead to a painfully slow recovery. Conflicts in Iraq, Syria, Palestine, and Yemen continue to claim lives, whereas Lebanese people are already struggling to cope with falling living standards and heightened poverty.
Rising inequalities are a concern for Asia. Already a large, young workforce is lagging. Asian economies are overly reliant on exports and tourism sectors, which are particularly difficult to recover from. Their large informal sectors are finding it tough to attain the 2019 era bustling growth. High indebtedness is another problem. Strong monetary policies have resulted in a drop in capital outflow. However, the public and private sectors are still weak and several countries are on the verge of a debt crisis. The health crisis is yet far from over. Policymakers are trying to introduce strong health policies.
Experts suggest that strong and inclusive health policies are a must to regain recovery. The young and women are the most vulnerable section of the population. If unable to attain recovery, there are chances that Asian states will face public unrest and violence which can further put the economies in a downturn spiral. Corporate restructuring and resource reallocation is a must too because the pandemic has changed the global economic scenario drastically compared to the pre-pandemic level. The solution lies in vaccine and politics.
Many countries in Asia, especially Southeast Asia, are experiencing political turmoil. Malaysia and Thailand are suffering from wide-ranging protests and a crisis involving their governments while India’s problem is centered around its ever-hungry farmers protest encircling Delhi. China-US trade relations are also crucial for the economies of Asia to fully regain their potential. Apart from this political jumble, the key to full recovery lies in the vaccine.
While many countries have already ordered or received millions of doses, it’s quite difficult for the developing world to fully vaccinate their entire population. Newly industrialized economies of Asia mostly have large populations, which makes total vaccination a difficult and time-consuming process. In an overall sense, it’s 2022 when Asian economies can regain their powerful economic seats in the world market.