The snail pace of economic recovery in Southeast Asia
The January 2021 World Economic Outlook (WEO) update forecast global economic growth of 5.5%. The growth projections of the gross domestic product (GDP) of the countries of the Association of Southeast Asian Nations (ASEAN), namely Indonesia, Malaysia, Thailand, the Philippines and Singapore, s’ establish at 5.2% this year against -3.7% last year. He also set GDP growth for the same group at 6% for 2022. Optimism had accelerated as the October 2020 WEO suggested “stronger than expected momentum” for the rollout of the vaccination. Commercially, although international trade is declining, the oversized demand for certain items such as Personal Protective Equipment (PPE) kits, electronics and the sale of these items induced by labor practice at home, gave hope for a faster economy. recovery in an export-oriented region. Yet Covid-19 has been harsh for its unpredictability.
In mid-2021, it was noted that the stories of economic recovery were more optimistic than the reality depicted. Look at two of the fastest growing sectors in Southeast Asia. First, with the closure of international borders and travel restrictions imposed by mid-2020, the tourism industry suddenly came to a halt. The tourism sector in Southeast Asia’s largest economy, Indonesia, has fallen by 75%. In 2019, it represented 5.7% of the country’s GDP and created 12.6 million jobs. When Covid hit, foreign arrivals fell from 11.6 million in 2019 to 4.02 million in 2020. Similarly, the Philippines saw an 85% drop, Thailand 83%, Cambodia 80% and Myanmar by 75%.
Released in March 2021, the Asian Development Outlook (ADB Brief 175) identifies restoring tourism demand as essential. But things are more complex than they appear. In Indonesia, the government has attempted to replicate the usually successful Balinese model by promoting high-end tourism through its “10 New Balis” program. For a post-Covid recovery plan, this helped attract few tourists who could afford expensive packages, in turn benefiting the economy in terms of profit. But, it did not do well in terms of empowering the local population in times of crisis, when unemployment was on the rise. Today, the tourism industry is starting to breathe again, especially with the upcoming holiday season. But the recovery is still slow.
There is a second area that needs to be analyzed. The slowdown in international trade in Southeast Asia, particularly due to early shutdowns in China, has resulted in supply chain disruptions and negative impacts on production at the national level. Interestingly, merchandise exports, which fell nearly a fifth around mid-2020, picked up in October last year and continued to create export demand from states like Vietnam, Singapore. , Malaysia and Thailand. From automobiles to chemicals, agricultural items to clothing, exports saw good growth in the first half of the year at the start of 2021. But in April, vital manufacturing inputs and final product exports were again compromised. Malaysia, Thailand and Vietnam are the most affected as they form the heart of the manufacturing hub of Southeast Asia.
The AfDB has lowered its growth forecast for Southeast Asia by September 2021 from 4.4% to 3.1% for this year. For 2022, it has been lowered from 5.1% to 5%. Exceptions have been made for Singapore and the Philippines. In contrast, he raised the economic forecast for East Asia from 7.4% to 7.6%. Likewise, growth prospects for Central Asia improved from 3.4% to 4.1%. What then is the problem with Southeast Asia?
Two problems are clearly visible. One, recurring waves of Covid and new variants. In Vietnam, for example, facilities of technology suppliers in the north to footwear production facilities in the south that are part of the supply chain of Nike and Adidas, have been affected by the lockdown, starting in April. 2021. This despite the commendable public health of the country. reply. In June, a hybrid virus of the India and United Kingdom (UK) variant was reported in the country. Second, the slowness of the vaccination process and the low level of fiscal largesse for the health sector. In June of this year, with the exception of Singapore, both in terms of immunization and tax response, states performed below expectations. In 2020, for example, Southeast Asia’s fiscal response was only 3 percent of GDP compared to 13.5 percent globally, and even higher figures in some Western states. Things have accelerated now. On the vaccination front, for example, Cambodia reported 85.3% vaccination of its population in October 2021.
When solutions are sought, AfDB’s proposals are useful. He identified five key sectors to focus on to revive Southeast Asian economies: tourism, agribusiness, clothing among established fields, electronics and digital commerce among those that have future potential. In addition, it has been repeatedly stressed that multilateral cooperation is the key to a stable economic recovery. Within the region, ASEAN has been the driving force in this context. The ASEAN Emergency Operational Center Network for Public Health Emergencies and the ASEAN BioDiaspora Virtual Center have been effective means of dealing with the pandemic situation. International aid in terms of aid, assistance and advice as well as financial support have come from states such as the United States and Japan.
As we approach the end of the year, instead of the Christmas season, many unfortunately remember the upcoming second anniversary of the onset of Covid-19, reported only on December 31, 2019. At the time of the World Organization (WHO) published its strategic preparedness and response plan in February 2020, news of the first case of Covid outside of China arrived on January 13 of last year, from Thailand. Now it makes sense to evaluate and learn from experiences, of course related to the unpredictability of the changing corona virus.
(Shrabana Barua is Assistant Professor, Department of Political Science, Hindu College, University of Delhi)
(Opinions expressed are personal)