Just like economies the world over, nations across Asia have not been immune from the impact of the coronavirus pandemic. At various stages and to different degrees, the public health crisis led to the shutdown of communities, cities and countries. And the impact on Asian economies is significant – even unprecedented, if you will, in modern times. But what does the future hold?
The prospects in the short-term may look gloomy – not least if the World Bank’s prediction of a 5.2% contraction in the global economy proves correct. But, with lockdowns easing and nations starting to reopen, there is some light at the end of the tunnel. There are hopes that, while that recession is likely to be unavoidable in 2020, a return to growth is possible going into 2021.
Recession: Setting in for the short-term?
The rolling back of Asian economies in 2020 will be down to several factors. From the closure of factories to blanket travel restrictions affecting global tourism, many key economic drivers have slowed to a standstill. Japanese factory output, for example, fell 8.4% month-on-month in May.
It isn’t as if each Asian economy can expect to see the same impact, however. Take Vietnam as one example. It suffered the economic effect of the pandemic like any other. But it is one of the Asian economies that could be best placed to recover thanks to its swift containment strategy.
A return to growth now expected in 2021
As Asian economies start on the path to recovery, the focus will turn towards central banks and governments. Their economic news releases that give so much insight into market performance could hold important clues to how quick countries recover – and what that recovery looks like.
Vietnam – together with Taiwan and South Korea – are just some examples of Asian economies on course to return to growth in 2021. That growth may still fall below pre-coronavirus levels – but any recovery that is “benefitting from exceptional policy support” (IMF), is surely welcome.
What about the threat of a second wave?
You can look at the growth forecasts for 2021 as bullish, optimistic, or encouraging. It will come down to your own thoughts. But much can still also depend on consumer confidence – not least in the largest of Asian economies. And China is expected to be again the barometer of this.
There has, of course, been a lot of talk about a second wave of the pandemic. This threat is not being ignored by the markets, either. Late June saw traders go on the defensive as fears of the coronavirus’ resurgence surfaced. This market sentiment is one to watch out for going forward.
The one thing we can be sure of is that we cannot be sure. The coronavirus is yet to be beaten and, until a vaccine is found, the threat will remain. Any spike in cases will lead to a renewal of restrictions and reduction in economic activity that won’t be constrained to any one economy.
And this is what, for now, continues to hang over hopes that growth in 2021 is a real prospect.