Far East will lead 2021 recovery
The pandemic triggered in January 2020 by the Sars-COV-2 virus hit the Asian continent in the first half of 2020: regional economies fell into recession. Most of the countries recorded a decline in gross domestic product and other macroeconomic indicators.
However, many Asian countries, especially those in the Far East, effectively contained the pandemic's spread and started to recover, starting from the third quarter, even if at different speeds.
Based on the International Monetary Fund' (IMF) latest estimates, the region's economy is expected to decline by 2.2% in 2020 and rebound by 6.9% in 2021, while the global economy will decrease by 4.4% in 2020 and grow by 5.2% in 2021.
While much of the world continues to struggle with the virus, China's recovery has been relatively rapid. The country has enforced strict population-monitoring and blocking policies designed to contain the virus and set aside hundreds of billions of dollars for large infrastructure projects to fuel economic growth. The government has rolled out a raft of measures, including more fiscal spending, tax relief, and cuts in lending rates to revive the coronavirus-hit economy and support employment.
According to IMF estimates, growth in 2020 will be 1.9%, making China one of the world's few economies to record a growth of national GDP after the increase of 6.1% in 2019. In 2021 the GDP growth is expected to reach 8.2%.
In November, China signed the RCEP agreement with other 14 countries, accounting for about 30% of the world's population (2.2 billion people) and 30% of global GDP (USD 26 trillion) as of 2020, making it the largest free trade agreement in history.
In the latest economic projections by the IMF, South Korea's GDP would decline by 1.9% in 2020, after the growth of 2.0% in 2019.
Even though South Korea was not hit as hard by the pandemic as most other countries, the government has quickly launched an aggressive fiscal response, pouring around USD 12 billion, or about 0.7 percent of the country's GDP, into the pockets of businesses and citizens in early spring.
Moreover, in early November, South Korea announced its fourth round of stimulus by injecting an additional USD 6.5 billion; the expansionary approach will likely continue through next year to counter the lingering economic impacts of the pandemic.
GDP is projected to increase by 2.9% in 2021. Strong growth in government consumption and transfers provide a significant boost to the economy, and the New Deal will support investment. Exports are expected to expand further as the global economy picks up, and a potential easing in US-China trade tensions would impart additional momentum.
The recently signed Regional Comprehensive Economic Partnership agreement will also support exports.
The COVID-19 shock in early 2020 triggered a significant recession, and GDP is projected to shrink by around 5.3% this year, from 0.7% in 2019. Ongoing difficulties in bringing COVID-19 infections under control held back domestic demand and postponed new investments. As restrictions are lifted in the near term, consumption is expected to recover, supported by government subsidies and incentives. In addition, a recovering external demand, as the sanitary situation of trading partners improves, will sustain export growth. GDP is projected to expand by 2.3% in 2021, assuming further economic stimulus.
With the latest signing of the RCEP free trade agreement, Japan could find significant advantages, having preferential access to South Korea and China, which previously did not have.
The smallest among the ASEAN countries would grow by 0.1% in 2020, thanks to containment measures and prioritized policy measures that have been implemented after the first outbreak of the pandemic in March 2020, including economic relief packages to mitigate the impact on vulnerable sectors and support economic activities.
The economy is expected to expand by 3.2% in 2021, rebounding to the same level of 2019, when the GDP grew by 3.9%.
Cambodia has been heavily affected by the COVID-19 pandemic, which caused a collapse in international tourism and the service sector. After Cambodia closed its borders and stopped issuing tourist visas, international visitor arrivals plunged 98.1% year-on-year in the second quarter. In addition, the lockdown measures in other countries reduced the exports and the remittance from other countries. In 2020 the GDP is expected to decrease by 2.8%, after performing very well in 2019, when the economy expanded by 7.0%.
However, the government prepared a comprehensive response to the pandemic and, GDP growth is expected to resume in 2021 with a forecasted growth rate of 6.8%.
Due to COVID-19, the Indonesian economy contracted in 2020, for the first time since the Asian financial crisis in 1997, hit by both supply and demand shocks. Indonesia's consumption contract in the first half of 2020, as households cut spending, businesses postponed investments, and the government redirected expenditure from general activities to the pandemic response. Pervasive social restrictions are being relaxed only slowly and will continue to depress spending in the near term. GDP will decline by 1.5% in 2020 from 5.0% in 2019.
The loosening of the containment measures and the recovery of the domestic demand after the lift of most of the restrictions would support the economic recovery in 2021. The GDP is expected to grow by 6.1%.
Unlike the neighboring countries, Laos' GDP is expected to remain relatively stable in 2020, up by a modest 0.2%, after the good economic result achieved in 2019, when the economy expanded by 5.2%. The outbreak and the global downturn slowed the economy sharply in the first half of the year, with industry and services hit hard by slower growth in exports and fewer tourist arrivals. However, the economy benefited from several economic stimulus packages endorsed by the government in response to the pandemic.
In 2021, according to the estimation of the IMF, the economy would start to grow again, with an increase of GDP of 4.8%.
The COVID-19 outbreak has wholly reshaped the economic situation of Malaysia. To fight the pandemic and its consequences, the government announced four fiscal stimulus packages and liquidity support to boost domestic demand, employment, and health expenditure. The support was characterized by a strong focus on small-medium enterprises and workforce protection.
Despite the economic measures implemented, the country's GDP will plunge by 6.0% in 2020, differently from 2019, when the economy expanded by 4.3%.
Based on the IMF report, Malaysian GDP is projected to grow again by 7.8% in 2021, thanks to the businesses' recovery, the promise of large public investments, and the relaxation of travel restrictions.
COVID-19 and its outbreak have slowed the economic growth of the country, causing a shock in the demand and supply, especially in the manufacturing sectors: the lockdown in other countries and the containment measures hit companies producing and exporting garments. However, the country reacted well, especially its primary industry: the production and the export of agricultural products seem to be less exposed to COVID-19 than other sectors.
Despite the consequences of the COVID-19 crisis, Myanmar would be among the few countries able to keep the growth of the GDP during 2020: according to IMF's estimates, the economy will further expand by 2.0%, after 6.5% recorded in 2019. In 2021 the growth is expected to be more consistent at 5.7%.
Due to the COVID-19 outbreak and the extended community quarantine measures imposed in the country that caused the interruption of business and economic activities, the GDP of the Philippines would fall by 8.3%: the economy would be among the hardest hit in the region, after surging by 6.0% in 2019.
The pandemic has driven the country to a decline in consumption and investments, exacerbated by the sharp slowdown in exports, tourism, and remittances from abroad.
The economic growth is expected to rebound gradually in 2021 to 7.4%, assuming a global containment of the pandemic and additional fiscal and financial supports to boost business activities and employment.
Moreover, the Philippines has signed the RCEP agreement, which will help the country to recover from COVID-19 and speed up the implementation of programs and policies to make the country a manufacturing and investment hub in the region.
The pandemic situation has driven Singapore to implement stringent COVID-19 containment measures, which curbed internal demand, slowed the economy, and weakened the labor market.
In response to the COVID-19 and its economic consequences, the government implemented fiscal stimulus packages to support the demand side. However, the GDP is expected to contract by 6.0% in 2020, differently from the previous year when it increased by 0.7%. Nevertheless, the IMF estimates that economic growth would rebound to 5.0% in 2021,
Singapore is among the signatories of the RCEP, and this could provide an additional boost of foreign investments in the city-state in the next years.
Thailand's economy was already moderately slowing down in 2019, with a GDP growth rate of just 2.4%, caused by different reasons, including a severe drought.
Even though the local government has managed the outbreak rapidly, containment measures and travel restrictions heavily affected the domestic demand and the tourism sector. Exports of goods and services contracted significantly due to weaker external demand and disruption to global and regional supply chains.
In the short term, the economic outlook is grim: the IMF estimates that the economy will contract sharply by 7.1% in 2020 before bouncing back with 4.0% growth in 2021 thanks to the recovery of the internal demand and the resumption of economic activities.
Vietnam is among the few countries where the GDP is expected to expand in 2020, thanks to the effective containment of the pandemic and the quick support to enterprises and individuals. According to the latest IMF estimates, the GDP of Vietnam is expected to grow by 1.6% in 2020, after the excellent performance in 2019, when the country's economy increased by 7.0%. During the year, Vietnam has also ratified the free trade agreement with the EU, which could boost trade and investments in the coming years.
In 2021, IMF provides a bright outlook, forecasting a growth rate of 6.7%: due to the running trade war between China and the US, Vietnam is considered as an alternative manufacturing hub for multinational groups looking to relocate their production and supply chain.