How is the Economic Outlook Looking for Asia?
The coronavirus pandemic has had a devastating impact around the world and not only in terms of a health crisis.
Economies have been hit massively in areas all over the globe with people having to spend time at home and with many not spending due to concerns over the future and their finances. Covid-19 has triggered a downturn as bad as the great depression in the 1930’s and it will be a long road back.
The IMF issued its World Economic Outlook (WEO) in April with the projection of the global output in 2020 dropping substantially from 3% to -3.3% before the June report was further revised downward to -4.9%.
Since the release of the report in April, most Asian nations have had to strengthen their containment measures of the virus outside of China and different nations are in different stages with some attempting to flatten the curve, others experiencing spikes and a few seeming to control the virus well which has made trading on the market extremely difficult for investors.
Asia’s output is expected to contract by 1.6% with most countries in the region predicted to contract, including Korea by around 2%, India by 4.5% and Japan by 5.8%. Very few in Asia and the Pacific will grow (although many did in the first quarter of 2020) with China expected to grow by 1%.
Asia May Struggle to Recover
Experts also predict that it might take Asia to recover economically longer than other areas of the world. A pick-up of 6.6% is predicted in Asia and 8.2% for China in 2021 which sounds promising, but leaves the level of Asia’s real GDP 5% lower in 2021 compared to the projections made prior to the pandemic.
The main reasons for this slow recovery are thought to be the scope and duration of lockdown periods and, even when these were lifted, economic activity is nowhere near pre-pandemic levels for a few reasons.
Trade growth has also slowed with Asian economies relying heavily on global supply chains, so when you consider that many economies outside of Asia have also suffered greatly with many falling into recession, it is predicted that imports and exports will contract significantly and it is impossible to predict when this will change.
Could China Help Asia Out of Problems?
It is clearly a troubling time for Asian and global economies, particularly with concerns over second waves appearing this winter.
It has been suggested that China could potentially bring other Asian countries out of their economic struggles if they were to move away from the view of seeing compromise with foreign nations as unnecessary other than for essential trade. China can grow its regional and global influence through mutually valued international partnerships which could yield economic gains as well as help China to gain political support.
The pandemic is certainly not over yet and there are trying times ahead both in terms of the health crisis and economic difficulties around the world. It will be a test of Asia’s resilience to get back to where they want looking at economic projections and it will be interesting to see what kind of regional partnerships and adaptations are made to recover.