New normal of Asian economies: Navigating out of pandemic state

Karishma Vaswani August 10, 2021 09:34

What can we expect from Asia’s economies as we move into the ‘new normal’

In my time reporting on Asia in the last twenty years for the BBC, I think it’s safe to say I've never seen anything like the impact of the pandemic across the region.

It was only in December 2019 when news started emerging of a mysterious new virus that had first been detected in China.

By June 2020, six months after the first case was detected in China, the death toll from the coronavirus hit 500,000 globally, with more than 10 million cases worldwide.

Today, more than 4 million people have lost their lives to the virus, with almost 200 million people infected.

Many of these infections are being driven by the highly contagious and transmissible Delta variant, and increasingly countries in Asia are bearing the brunt of new cases and higher deaths.

Without a speedy and successful vaccination policy, many developing economies in Asia are looking down the barrel of continued and sporadic lockdowns, and making the choice between saving lives or livelihoods.

Policy makers around the region are scrambling to help their ailing citizens – but what shape might Asia’s economies take as they try and emerge from this crisis?

CHINA

China was first into the pandemic, and also the first out. It was the only major economy to have grown last year, and recent economic data is showing that it continues to recover albeit not as strongly as last year.

But it is also now grappling with what state media there is calling the worst outbreak since Wuhan.

Cases were first detected in the city of Nanjing, and have now spread to several other provinces and cities – including Wuhan and Beijing. Hundreds of thousands of people have been ordered not to leave their homes for several days, and massive testing is underway.

Policy-makers will be very concerned about whether renewed COVID fears put a dampener on growth.

The mainland has been focused on keeping domestic growth strong, and has been increasingly turning inwards, with its economic policy of dual circulation - President Xi Jinping’s plan to make China’s economy more self-sufficient and reliant on domestic demand.

Analysts say that means Asia may not be able to depend on China’s economic growth to lift them out of their slumps as much as they used to.

JAPAN

Japan had been pinning its hopes on the Olympics to help revitalise a coronavirus hit economy.

Instead, it’s been mired in controversy around a slow vaccine rollout, and the decision to go ahead with the games has led to protests and political capital wasted for Prime Minister Yoshihide Suga.

Zero spectators at the events and a state of emergency also means the boost from tourists to small businesses hasn’t happened.

As Professor Noriko Hama of the Doshisha Business School told The Diplomat, the Olympics have been a “net negative” for Japan’s economy.

The focus now has to be on vaccinations – which the government is pushing its citizens to get, but there simply aren’t enough supplies.

SINGAPORE, TAIWAN, HONG KONG

These are the economies that tried to contain covid early on, and keep numbers as low or close to zero as possible.

But it hasn’t been, mainly because of the Delta variant, and they are now beginning to transition into the ‘We-Can-Deal-With-Covid’ economies.

That transition has been slow though – and has depended on the pace of vaccinations.

In Singapore for instance, a new round of restrictions has been put into place as the country ramps up its vaccination policy.

Trade, tourism and travel have been disrupted for all three. The realisation is growing that living with the pandemic is going to be the way out of this crisis – because the costs are getting too much to bear for these.

Singapore for example has spent more than US$70bn on shoring up businesses and households. While it continues to help those who have been affected the government has signalled this cannot go on forever, and that the economy has to open up.

Key to the transition will be the local population’s take-up of the vaccine and comfort with rising infections.

SOUTH EAST ASIA

There’s no better illustration of how unequal the pandemic has been in terms of its impact – than the experiences the South East Asian economies – sans Singapore – are facing right now.

Infections are rising, as are hospitalisations and deaths in Indonesia, Thailand and Malaysia.

The pace of vaccinations is agonisingly slow - although picking up, but the question is – will it be fast enough.

As the rest of the world begins the slow climb out of COVID, SEA is arguably in a worse scenario than it was last year at this time, relative to the rest of the world.

This week the IMF cut its growth forecast for emerging Asia because of the rise of cases from the new variants, and said vaccine inequality is holding this region back.

In its latest World Economic Outlook forecast the Fund warned that “vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs: those that can look forward to further normalisation of activity later this year (almost all advanced economies) and those that will still face resurgent infections and rising COVID death tolls”.

Last time these economies were as precarious was arguably 1997, during the Asian Financial Crisis.

Granted, lessons have been learnt since then - and the financial health of institutions like the banking sector are much stronger.

But increasingly analysts are concerned about political protests, chaos if lockdowns continue, as more people feel unsupported by their governments.

CONCLUSION

It is clear that vaccinations are the way out of the pandemic.

The countries that have access to them are on their way to economic recovery – even with rising infections, although risks do remain – as the charts below by John Burn-Murdoch of the Financial Times show.

The glaring vaccine inequality has exacerbated the rich and poor divide.

Mutations and new variants mean the outlook for developing Asia is grim.

Advanced economies could return to some normalcy by the end of this year, but even so – they can’t close themselves off to the rest of the world forever - and until more people worldwide are vaccinated, the risk of a new outbreak or mutation will always be there.

Surely if the pandemic has taught us anything – it is this: that we are all connected – and no one is safe, until we all are.

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Karishma Vaswani

Asia Presenter, Newsday, Asia Business Report, BBC News. Newsday will be broadcast globally out of the Singapore bureau at 6am - 6.30am, HK/Singapore 7am - 7.30am HK/Singapore and 8am - 8.30am HK/Singapore Monday to Friday.