Asia-Pacific economy leads global recovery from COVID-19 – Moody’s Analytics
19 Nov 2020
The Asia-Pacific (APAC) economy is leading the global recovery from COVID-19, driven by the control of the pandemic, the easing of lockdowns and the improvement in global trade, said Moody’s Analytics.
Its chief APAC economist, Steve Cochrane said Asia’s recovery is led by China, and China’s recovery is led by exports, which have been above pre-COVID-19 levels since midyear.
“China’s acceleration of international trade and the rising amount of imports are being felt elsewhere in the APAC region, with Vietnam, Singapore, Taiwan, Malaysia, and New Zealand reporting exports above those one year ago as of September,” he said in a report titled “APAC Outlook: Next Year Looks Better for Most of the Region” dated Nov 17, 2020.
According to Cochrane, although only a few countries have reported their third-quarter gross domestic product (GDP) growth rates, those that have as of Nov 13, 2020 — China, Indonesia, Malaysia and South Korea — each reported quarter-to-quarter growth.
“The APAC economy has done the best job of containing COVID-19 and it is rebounding with the global recovery of industrial production and global trade.
“Further, it enjoys a level of fiscal support in many countries that will keep a floor under the economy and preserve enterprises and household financial conditions so that they are able to contribute to economic recovery,” he said.
In terms of portfolio flows, Cochrane said investors never lost confidence in China, while Malaysia and the Philippines similarly have had cumulative net positive debt flows so far this year.
Despite the recovery, he noted that the entire APAC region would not fully recover until an extended rebound of the global economy expands the range of global trade to include more consumer goods such as automobiles and commodities such as crude oil and petrochemicals.
He said the economic recovery in the APAC region would not be complete until international travel and tourism flourish once again.
“This will be a long process as officials assess the pandemic control measures in the origin countries of their inbound travellers and tourists,” he added.
Other risks within the region is the willingness of governments to continue to provide targeted fiscal support to households and industries hurt by the pandemic, he said.
However, he noted that Malaysia, Singapore, Australia and Japan do have sizeable support programmes that directly target households and struggling industries.
While it is easy to illustrate the APAC region’s abilities to contain the pandemic, he said there are local clusters that illustrate remaining risk within the region, for instance, Malaysia’s caseload is soaring and all but four of Malaysia’s states are now under movement restriction orders.
“Barring any large-scale return of COVID-19, investors will likely bolster the APAC region’s emerging markets, particularly if emerging markets in Eastern Europe, Latin America and Africa continue to struggle with the economic consequences of the pandemic,” he said.
Overall, Cochrane said the baseline economic outlook called for growth across the entire APAC region in 2021, with the fastest growth would be in China, Vietnam and Hong Kong.