The World Bank’s East Asia and Pacific Economic Update, April 2020, illustrates the damage down by the coronavirus on Southeast Asia’s economies
Asia-Pacific’s emerging economies are facing a sharp slowdown in growth this year and regional GDP could even contract if the impact of the coronavirus outbreak is prolonged, the World Bank said in a new report.
“The COVID-19 virus that triggered a supply shock in China has now caused a global shock. Developing economies in East Asia and the Pacific, recovering from a trade war and struggling with a viral disease, now face the prospect of a global financial shock and recession,” the report said.
Significant economic pain seems unavoidable in all countries and the risk of financial instability is high, especially in countries with excessive private indebtedness. Several economies are expected to contract in 2020, which will lead to an increase in the poverty rate. Households linked to affected sectors will suffer more.
China growth more than halves, gloomy forecast for Malaysia, Thailand
The report forecasts that economic growth in China will fall from 6.1 per cent in 2019 to 2.3 per cent this year under the World Bank’s baseline scenario, in which a severe growth slowdown is followed by a sharp recovery. China’s economy almost enters recession under the lower-case scenario, which sees a deeper contraction and a more sluggish recovery with GDP expanding by just 0.1 per cent.
East Asia’s other emerging economies – excluding developed nations such as Japan, South Korea and Singapore –will expand by 1.3 per cent in the baseline scenario but shrink by 2.8 per cent under its lower-case scenario.
Malaysia and Thailand are facing a dire prognosis, with a potential correction in the worst case of 4.6 per cent and five per cent, respectively.
“To deal with this crisis, countries need to act fast and decisively to contain the spread of infection, while expanding capacity both to treat people and to test and trace infections,” the report noted.
“Fiscal measures should provide social protection to cushion against shocks, especially for the most economically vulnerable. Firms will need liquidity injections to help them stay in business and maintain beneficial links to global value chains,” it added.