ONE thing for sure in today’s world that has been severely ravaged by the COVID-19 virus is that there will probably be no return to the pre-pandemic normal.
With this in mind, Maybank Kim Eng Research has highlighted eight structural shifts, some of which were already in train but which the pandemic accelerated.
First, the pandemic has accelerated digitalisation and the adoption of technology. ASEAN added 40 million new internet users in 2020 (+11% from 2019) compared to 100 million in 2015-2019.
“This has sped up the death of physical retail and growth of e-commerce, and boosted the use of digital payments,” wrote chief economist Suhaimi Ilias and team in an ASEAN strategic note.
“Second, the proportion of ‘work from home’ workers post-pandemic will likely be higher. Demand for dedicated offices could shift to homes and co-working spaces.”
Third, Maybank Kim Eng Research sees stricter border controls to persist even after the pandemic is over, thus changing the future of air travel.
“Business travel would likely fall as Zoom calls substitute face-to-face meetings,” Suhaimi and team envisaged. “Tourism will take longer to recover as any vaccine will not completely eradicate the virus and may take a year before being widely available across ASEAN.”
Fourth, the pandemic crisis will drive more countries to be more self-sufficient, including for food, medical supplies and key technologies, according to the research house.
Towards this end, the Philippines allocated US$615 mil to enhance food security and raise domestic rice production to 93% (from 87%) of consumption.
Fifth, the pandemic has not severed the structural shift for multinationals to diversify their manufacturing supply chains and reduce their dependence on China. In fact, the pandemic has reinforced the case for diversification.
“Japan has earmarked US$223 mil to support its firms to relocate production out of China to ASEAN, of which Vietnam received the most interest,” Maybank Kim Eng pointed out.
Sixth, many governments will have to review and broaden their social safety nets in the aftermath as the recession has exposed wide cracks.
“The pandemic had a disproportionately large negative impact on low-wage workers,” revealed Suhaimi and team. “Singapore will likely expand the coverage of its Progressive Wage Model.”
Seventh, the pandemic has pushed governments to play an expanded role, whether in terms of fiscal support or stakes in private companies (e.g. aviation). “Public debt will likely be permanently larger post-pandemic, which might imply higher taxes,” opined Maybank Kim Eng Research.
Last but not least, the pandemic recession has removed the stigma for central banks to monetise and finance a greater proportion of fiscal deficits.
In ASEAN, central bank asset purchases have been especially large for the Philippines (7.3% of gross domestic product) and Indonesia (3.8%), but smaller for Thailand (1%) & Malaysia (0.6%).
“The post-pandemic normal will likely see lower global growth as stricter border controls, self-sufficiency drives and re-configuration of supply chains will sacrifice some efficiency and past gains from globalisation,” added the research house. – Nov 16, 2020
