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    Southeast Asia Rising from the Pandemic
    Southeast Asia Rising from the Pandemic
    Southeast Asia Rising from the Pandemic
    Ebook263 pages2 hours

    Southeast Asia Rising from the Pandemic

    By Asian Development Bank

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    About this ebook

    This publication offers a comprehensive regional-level analysis of Southeast Asia’s fragile recovery from the coronavirus disease (COVID-19) that damaged some core economic drivers and sank millions into poverty. It gives a rundown of how eight Southeast Asian countries have dealt with the pandemic and are now beginning to recover. It looks at how countries have reshaped their economies to cope with the crisis and considers the impact of job losses as COVID-19 sent development gains into reverse. Against a backdrop of global economic headwinds and looming climate change, it offers a range of recommendations for how policymakers can best weave lessons from the pandemic into their drive for a resilient and inclusive recovery.
    LanguageEnglish
    PublisherAsian Development Bank
    Release dateMar 1, 2022
    ISBN9789292694067
    Southeast Asia Rising from the Pandemic

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      Southeast Asia Rising from the Pandemic - Asian Development Bank

      1

      Southeast Asia:

      Establishing Economic Recovery Pathways

      More than 2 years after the pandemic started, Southeast Asia is slowly beginning to recover with mobility indicators and manufacturing activities rebounding everywhere. The extent of the recovery, however, remains uneven, and sensitive to the volatile path of the pandemic. Output levels in 2022 will likely remain well below the no-COVID baseline level, and the spread of the Omicron variant could further reduce growth forecasts for 2022. However, policies such as investments in health that would bring the region’s health-care system closer to the universal health standards can have a significant impact on disease burden and output growth in 2022. While the pandemic has exposed many of the region’s economic and social vulnerabilities, it has also intensified earnest efforts to build back better, which governments can do by improving social assistance programs, supporting small enterprises, building competitiveness, and choosing a greener path to economic recovery.

      Note: This chapter was written by James Villafuerte of the Regional Cooperation and Operations Coordination Division (SERC) and Damaris Yarcia, SERC consultant.

      IIntroduction

      At the onset of the pandemic, governments in the region had to resort to lockdowns and border closures to control the spread of COVID-19. These measures—necessary but severe—effectively disrupted economic activities and output growth in the region. After growing by 4.4% in 2019, Southeast Asia’s output contracted by about 4% in 2020. The decline in output varied across economies in Southeast Asia, with some more severely affected than others. In the Philippines, Thailand, and Malaysia, for example, output in 2020 fell by 9.6%, 6.1%, and 5.6%, respectively (Figure 1.1).

      Figure 1.1: The Pandemic’s Impact on Output Growth

      f = forecast, Lao PDR = Lao People’s Democratic Republic.

      Sources: Asian Development Outlook September 2021 Update and Asian Development Outlook December 2021 Supplement.

      In 2021, as the COVID-19 Delta variant spread across the region, more restrictions on mobility and economic activities were imposed during the second and third quarters of the year. As a result, the outlook for Southeast Asia in 2021 was downgraded from 4.4% in April to about 3% in December. Forecast revisions within the region vary. Economic projections for Malaysia and Viet Nam, for example, were downgraded after output contracted in the third quarter of 2021, which resulted in a negative outlook for the rest of the year. On the other hand, the performance and forecasts for the Philippines, Singapore, and Indonesia were upgraded. For 2022, projected economic growth for the region remains at 5.1%.

      The widespread and rapid administration of vaccines has helped curb the rise in daily new cases and deaths from COVID-19 in some countries in the region, which has allowed governments to slowly lift lockdowns, permit freer movement among the population, and resume business operations. The external environment for Southeast Asia has also improved. Output of major advanced economies, which include the United States (US), Japan, and the euro area, rebounded strongly from contracting by 4.5% in 2020 to expanding by a projected 5.2% in 2021. In Asia, output growth of the two largest economies—the People’s Republic of China (PRC) and India—remains solid and is expected to grow by 8% and 9.7%, respectively, in 2021.

      As Southeast Asia begins to slowly recover, manufacturing activities in economies with data continue to expand. Mobility indicators in retail and recreational areas in the region also improved 161% in February compared to the trough in 2020. However, two diverging growth scenarios are emerging: a more buoyant growth expected for Singapore, the Philippines, Malaysia, and Indonesia; and less rosy growth expectations for Thailand, Viet Nam, Brunei Darussalam, Cambodia, and the Lao People’s Democratic Republic (Lao PDR). The impact of the Delta variant has been more severe in the latter group of countries. These countries are more dependent on tourism, their vaccination progress has been relatively slow, or their manufacturing sector has been hit harder by the spread of COVID-19.

      There are several downside risks to economic recovery in Southeast Asia. The first is new COVID-19 variants and their potential effects on local, regional, and global economies. The second is increasing trade costs and continuing disruptions in global supply chains which can spark inflationary pressure as it undermines global confidence, trade, and recovery. The third is the possibility of a weaker external environment arising from premature tapering of quantitative easing and tightening of global interest rates. Southeast Asia is also quite vulnerable to natural hazards and disasters, which due to climate change seem to have become more frequent and costly in terms of damage and reconstruction.

      IIDrivers of Economic Recovery

      Southeast Asia comprises diverse economies with distinct characteristics and features that determine how they were affected by the pandemic. For example, the biggest impact of COVID-19 in the region was on services and tourism, with secondary effects on manufacturing and construction. Among those in the labor force, workers in low-skill office or in-person marketing or sales jobs were most affected as jobs shifted to a digital interface or e-commerce, a trend that is expected to stay. For business establishments, micro and small enterprises that cater to personal services and have little capability to go online were also severely impacted. Among the population, those who proved most defenseless were the poor who are mostly uninsured, work in the informal sector, and do not have savings to draw from during an

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