Moody’s: Asia-pacific Resuming Economic Recovery Amid Lower Delta Variant Infections
05 Oct 2021
Asia-Pacific is starting a period of recovery from the wave of the COVID-19 Delta variant, allowing for a resumption of economic recovery across much of the region in the fourth quarter of this year, according to Moody’s Analytics.
Asia-Pacific (APAC) chief Steve Cochrane said the movement controls put in place in Southeast Asia during the previous quarter due to the Delta wave has brought the region’s economy nearly to a halt.
However, he said, this will not last forever, as countries are now pulling back on movement controls as pandemic caseloads fall.
“Countries such as Indonesia, Malaysia and Thailand as well as Japan are now pulling back on movement controls as pandemic caseloads fall.
“Even the Philippines is instituting more targeted movement control orders, even as its daily caseload and coronavirus-related fatalities remain very high,” he said in a statement.
Cochrane said the uncertainty of COVID-19 and its impacts on global supply chains and industrial production is the greatest risk to the APAC economy as it approaches 2022.
While the current wave of the Delta variant is ebbing, the rapid response by policymakers to ease movement restrictions could set the region up for another as-yet-unknown variant, he said.
The Philippines, Vietnam, Indonesia and Thailand are the most vulnerable given their low vaccination rates to date.
India could be at similar risk, although there is a chance that it now has a high rate of natural immunity due to the two huge waves of infection it has already suffered, he explained.
“Fiscal and monetary policy also poses risks to economic performance in 2022. So far, Malaysia, Singapore and Japan appear set to continue some form of expansionary spending plans into 2022.
“Australia has begun a process of fiscal consolidation as it has curbed its extraordinary support for the unemployed while China moved early in paring back targeted spending programmes that supported manufacturing and infrastructure but is now injecting considerable liquidity into the financial system to ensure stability in the wake of the Evergrande debt crisis,” he added.
According to him, rising debt across the APAC region and looming acceleration inflation create risks that central banks will tighten monetary policy before Moody’s Analytics’ expectation of the second half of 2022.
“Indeed, the Bank of Korea was the first to raise its policy rate as it sought to curb high household debt and soaring property prices,” he noted.
A greater near-term threat is rising inflation, Cochrane said.
“The current pattern is uneven, but rising energy prices and China’s aggressive efforts to procure sufficient coal, natural gas, and other energy commodities for the winter months bode ill for containing inflation in the near term,” he said.
He added that at this time, inflation exceeds central bank target rates in only four APAC countries — Australia, New Zealand, South Korea and the Philippines.