TAKING into account the increase of economic activities, the pace of economic recovery over the second half of 2020 (2H20) is still expected to vary across the region, depending on the easing of lockdown restrictions and improved export demand.
This is based on the findings of the Global Economic Outlook report from Oxford Economic, which was commissioned by charted accountancy body, ICAEW.
According to the report, the global gross domestic product (GDP) will contract overall by 4.4% at the end of the year.
Even though the Covid-19 outbreak reduced the global GDP by around 9% in the first half of 2020 (1H20), growth is still expected to eventually rebound to 6.4% in 2021.
The report stated that there is momentum building in 2H20 which will drive growth to 5.8% next year and lead the global economy to recover to its pre-pandemic state, a similar time frame as the post-2008 financial crisis recovery.
However, the strength of the rebound, which will mainly be driven by the increase of economic activity around South-East Asia, remains uncertain.
“Additionally, the varying success rates of containing the Covid-19 outbreak and the differing lockdown exit strategies will widen the disparities of regional economic growth,” the report said.
“Economies that managed to efficiently contain the outbreak such as Thailand and Vietnam will see a stronger recovery than Indonesia and the Philippines, that are currently battling new waves of the pandemic after restrictions were prematurely relaxed,” it added.
Meanwhile, the forecast for growth in Singapore contracted by 5.7% due to a severe decline in global trade, hinting that signs of recovery will only rebound to 6.1% in 2021.
“Heavily export-oriented economies like Singapore and Vietnam will continue to benefit from a stabilisation in trade indicators, shown by recent improvements in exports over the past few months,” the report said.
It was also predicted that recovery prospects looked brightest for Vietnam, which is the only South-East Asian economy expected to record positive growth this year with its GDP rising by 2.3% in 2020 and 8% in 2021.
As for Malaysia, the report predicted that the country’s exports will benefit from improving Chinese import demand and the electronics cycle.
Nonetheless, the speed of its recovery will likely slow down, given the current sluggish global demand, high unemployment rate and weak investment.
“The road to recovery for economies in South-East Asia will be a long one, especially with the existing US-China tensions, a long-term slowdown in global trade activity and the pandemic itself weighing down the region’s growth prospects,” ICAEW regional director Mark Billington said in a Sept 21 note.
In China, the report showed that growth is likely to remain relatively robust in 2H20 as the country’s GDP is expected to grow 2.5% in 2020 and accelerate to 7.9% in 2021.
This is backed by strong demand for electronic products and exports of protective gear and medical equipment during the pandemic.
However, in the medium term, tensions with the US may disrupt demand for goods and increase disruption in manufacturing, with efforts to decrease American reliance on China expected to bring a negative impact.
As such, the economies for Indonesia and the Philippines are also expected to have a slow recovery as Covid-19 infections have started to accelerate again after lockdown restrictions were relaxed, causing reopening plans in these countries to be paused or reversed.
“Both economies remain highly vulnerable as they have weaker public health infrastructure, lower levels of fiscal support available and are much more consumer driven compared to other economies around the region,” the report said.
“The pace of recovery in Indonesia is expected to be slow and household income will be squeezed. GDP is expected to contract 2.7% in 2020 before a 6.2% expansion in 2021,” it added.
Meanwhile, the report stated that the Philippines is set to record the largest contraction in the region, with its GDP falling 8.2% in 2020 due to its dependence on international tourism and a slow exit from lockdown measures. – Sept 24, 2020
