Economic recovery seen faster in Asia

MANILA, Philippines — Emerging Asia economies are likely to recover faster from the pandemic compared with other regions in the world, said London-based think tank Capital Economics.

In a new report, the research firm said while most economies in the region would contract by 10 to 20 percent in the first half of the year, these countries still have strong fundamentals and are able to provide record levels of  economic stimulus.

“With many in the region appearing to be containing the virus and with record amounts of stimulus now being deployed, Emerging Asia should recover faster from the crisis than other parts of the global economy,” Capital Economics said.

Several countries in the region have so far reported weaker economic growth in the first quarter due to the combined effects of trade disruption because of the shutdown in China, a slump in tourism spending, and the restrictions in mobility to curb the spread of the virus.

These include Singapore, Philippines, China. Hong Kong, Thailand and Malaysia.

Growth in the second quarter is expected to be worse as lockdowns were only introduced late in March and extended well into the second quarter, and the collapse in global demand only started to show up in the merchandise trade figures from April.

Capital Economics noted that several countries in the region such as Hong Kong, Thailand, Vietnam and Taiwan appear to have successfully contained the virus.

“Lockdowns are being lifted, and while things remain a long way from normal, the daily data that we track suggest that people are slowly returning to work and are also spending more time in retail and entertainment venues,” the firm said.

Most countries in the region also came into the crisis in good economic shape as seen in low debt levels, enabling them to loosen fiscal policy aggressively.

“Policy support has been much bigger in Asia than in other parts of the emerging world,” said Capital Economics. “Aggressive policy action will support demand and living standards through the downturn, but also ensure that otherwise healthy companies are able to make it through the recession.”

Banking sectors across the region also remain well-placed to absorb losses caused by a sharp rise in non-performing loans.

“This reduces the risk that severe economic downturn morphs into a financial crisis and economic depression,” Capital Economics said.

The collapse in global oil prices since the start of the year will boost growth prospects in the region since most countries in Asia are large net oil importers.