APEC posts strong Q1 economic growth, set to hit 6.4 pct in 2021
17 Aug 2021
The Asia-Pacific Economic Cooperation (APEC) region posted a 6.1 per cent increase in economic growth in the first quarter (Q1) of 2021, bouncing back strongly from a two per cent decline in the first quarter of 2020.
According to the latest update from the APEC Policy Support Unit (PSU), the forum’s research and analysis arm, this number comfortably puts the region on track to achieve growth expectations for 2021, which is estimated at 6.4 per cent.
The report said the high growth in Q1 2021 was due to several factors, including the low comparison point following substantial economic contraction a year ago as well as higher government spending given the sustained impact of the pandemic on economic activities, while domestic consumption grew considerably during this period.
In the near term, the unit still expected sustained stimulus measures from governments to drive the region’s economic growth.
According to the report, private consumption will also get a boost of confidence as consumers are expected to draw on their accumulated savings, bolstered in part due to cash transfers and wide-ranging subsidies to households.
“Vaccination programmes and rollout still drive economic growth and the recovery progress in the region.
“We are still seeing a disparity in access to vaccination coverage across APEC; economies with faster rollouts and sustained fiscal support will recover faster and stronger, while economies that struggle with vaccine access and have limited fiscal space will take more time to recover due to these uncertainties,” said APEC PSU director Dr Denis Hew.
Vaccination coverage across APEC is noticeably diverse, ranging from 148 doses per 100 residents to a low of only one dose per 100 residents.
As a result, the rate of fully vaccinated people across economies varied greatly, from as low as 0.2 per cent to as high as 72 per cent of the population, as of mid-August.
“The race to vaccinate as many people as possible in the shortest amount of time is extremely crucial.
“Economies cannot afford to keep imposing restrictions, close borders and indefinitely provide wide-ranging fiscal and monetary support,” said Rhea C. Hernando, a researcher at the unit.
According to her, multilateral cooperation is key in facilitating the free flow of vaccine components and related supplies as this will significantly contribute to the accessibility and affordability of vaccines, especially for low- and middle-income economies.
“It is now clear that for economic recovery to be on firmer footing, health must be safeguarded, which in turn necessitates access to vaccines to protect as many people as possible, as soon as possible,” Hernando said.
On trade, the region performed positively in the first quarter of 2021, with the value of merchandise exports and imports growing at a higher rate of 16.8 per cent and 16.2 per cent, respectively, from a contraction of 6.1 per cent for exports and 4.1 per cent for imports during the same period last year.
This improved performance, the report said, was due mainly to pharmaceuticals and office and communications equipment, while the agrifood, apparel, metals and minerals sectors also added to the trade boost.
The unfaltering impact of COVID-19 on the transport and travel sectors continues to drag APEC’s commercial services performance.
From January to March 2021, commercial services declined further to 12 per cent for exports and 15.2 per cent for imports, compared with a decline of 9.5 per cent for exports and 9.2 per cent for imports for the same period in 2020.
The updated report also noted an increase in inflation during the first half of 2021 to 2.3 per cent, compared with 1.6 per cent in the first half of 2020, due to the gradual normalisation of prices.
“Inflation is expected to revert to its pre-pandemic levels globally once prices factor in pandemic-related supply-side disruptions,” it said.
According to the report, the whole-year forecast of inflation for the APEC region is two per cent and it could increase to 2.2 per cent in 2022.
“There is a risk that the upward trend in inflation could persist as consumption activity strengthens following successive quarters of pent-up demand,” it said.
The report advised that price pressures require continued monitoring and clear communication from monetary policy authorities to guide inflation expectations.