Eastern storm: Asian economies could face biggest fall in 60 years

In 2020, against the backdrop of the spread of coronavirus, the economies of the Asia-Pacific region (APR) may face the largest collapse in decades. This conclusion follows from the report of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

“According to preliminary estimates, only taking into account the impact of the COVID-19 pandemic on trade contracts, the region’s GDP can drop by 0.6-0.8%, which is $ 132-172 billion in financial terms," ​​the document says.

It is curious that since 1961 the Asia-Pacific economy has shown almost continuous growth. The only exception was 1998, when against the backdrop of the Asian financial crisis, the region’s GDP fell by 0.1%. This is evidenced by the World Bank.

According to ESCAP experts, Vietnam, Mongolia, Cambodia and Singapore are at the greatest risk of coronavirus spread. The export of these countries was largely focused on the United States and the European Union, where the most difficult situation with the COVID-19 pandemic is currently observed.

According to official data from the World Health Organization (WHO), the total number of coronavirus infected in the world exceeds 1.35 million, of which more than 79 thousand died. Most infected were registered in the USA (about 363 thousand), Spain (more than 140 thousand), Italy (135 thousand), Germany (103 thousand) and China (83 thousand).

The spread of the disease and quarantine measures introduced by states provoked a massive reduction in the volume of trade and passenger traffic in the world. Analysts at the Asian Development Bank forecast global pandemic losses of $ 4 trillion.

“The Asia-Pacific countries have faced a collapse in the export of their goods and services to Western countries, since the quarantine measures introduced have led to a sharp reduction in business activity and the destruction of production and trade chains. In fact, these states have lost one of their main markets, which will inevitably lead their economies to recession in the short term. GDP decline may reach 0.8-1%, ”said Sergey Suverov, senior analyst at BCS Premier, to RT.

According to him, in recent years, Vietnam, Mongolia and Cambodia have specialized in the supply to Europe and the United States of certain types of raw materials and agricultural products, as well as light industry products. At the same time, Singapore was one of the main providers of financial services for Western countries.

“Knowing this kind of dependence, the governments of the Asia-Pacific countries are now trying to mitigate the effects of the crisis. For example, they are actively pouring funds into social projects and supporting the population, ”added Suverov.

Meanwhile, the situation is complicated by a drop in trade turnover within the region itself. This was in an interview with RT, the head of the analytical department of AMarkets Artyom Deev.

“As a result of the quarantine in the APR domestic market, close trade ties have also been broken. People sit at home, so consumer demand has declined significantly. As a result, large enterprises began to incur losses, and small and medium-sized businesses began to close, ”said the analyst.

Amid falling commodity turnover, budgets of countries in the region may face a drop in tourism revenues. This was in an interview with RT told the expert of the Academy of Finance and Investment Management Alexei Krichevsky.

“Before the spread of the virus, Vietnam and Cambodia not only earned on the export of wood, but were also large tourist clusters in the region. Now the resorts are empty, which serves as an additional driver of GDP decline. Only Thailand is worse off, for which tourism has been a key source of income. As a result, the state will be able to return to pre-crisis indicators no earlier than in a few years, ”the expert explained.

Neighborhood Assistance

At the same time, the Chinese economy can mitigate the recession in the Asia-Pacific region, analysts say. Chinese authorities have already announced the end of the epidemic in the country. In this regard, the Asian Republic began to restart its plants after quarantine.

According to the Ministry of Industry and Information Technology of China, today more than 98% of small and medium enterprises have already returned to work. At the same time, growth in business activity in the manufacturing sector of China accelerated to a maximum over the past 2.5 years.

“Everyone is looking at China, which to some extent acts as a guarantor for the recovery of the APR economies from recession. Having seriously suffered itself, Beijing will still support its neighbors and restart the import of products from them. To increase supplies, the states of the region will need to restore transport and logistics chains, but in the context of low oil prices this can be done in a short time, ”noted Alexei Krichevsky.

At the same time, China is able to provide financial assistance to neighboring countries. According to Sergei Suverov, Beijing may launch a program of concessional lending for partners in the region.

“It is also possible to buy back part of the enterprises in which Beijing will be interested. In other words, while the EU and the USA are struggling with the consequences of the pandemic, the PRC can get a new loyal market, which will remain for it even after the end of the spread of COVID-19, ”concluded Suverov.