Regional experts weigh in on the economic impact of COVID-19
COVID-19 has accelerated digital technology and innovation as a response to keep economies going in the time of lockdowns and quarantines.
Dr. Abdul Abiad of the Asian Development Bank (ADB) and Dr. Denis Hew of the APEC Policy Support Unit (PSU) shared this view despite the impact of the pandemic to the regional economy during the first ABAC PH Forum entitled, “APEC Economic Outlook 2020-2022: How the region is picking up from COVID-19”, last 6 August 2020.
Dr. Abiad, the Director of the Macroeconomic Research Division of ADB said that the COVID-19 has continued to spread globally topping over 17 million cases worldwide by end-July, with developing Asia accounting for 16.4% of the total. Governments have imposed containment measures of varying stringency, which reduced mobility and affected economic activity. Outbreak severity, stringency of lockdowns, and reduced mobility all reduce domestic demand growth. The global environment would be weak, as many economies deal with their own outbreaks.
ADB projected a loss of $6.1-$9.1 trillion (7.1%-10.5%) of global GDP vs. a no-COVID baseline. Developing Asia would see its lowest growth in six decades (since 1961) and recovery of GDP levels in 2021 would not be V-shaped as most economies were expecting contractions. There is currently a global tourism collapse and full recovery in travel and tourism would take time.
Dr. Denis Hew, the head of PSU, saw a similar pattern in the Asia-Pacific region with a deeper economic contraction in 2020, a slower recovery in 2021, and that outlook, in general, was highly uncertain.
According to APEC’s research arm, the region could contract by 3.7% in 2020, equivalent to an output loss of $2.9 trillion. Economic rebound was projected at 5.7%, which was lower than the previous forecast of 6.3%. Q1 2020 merchandise trade showed bigger contraction, as trade tensions combined with global supply chain disruptions. In the near-term, trade, investments and consumption was expected to slow down: WTO projected world trade to drop substantially between 13%-32% in 2020, while UNCTAD estimated a reduction in global FDI flows by 40% this year. Further, the positive turnaround in trade growth could happen in 2021 and a rebound in FDI could begin in 2022, as demand shocks from containment measures and temporary border closures would hit global consumption.
Experts identified specific measures that economies should implement individually and collectively. First, maintain fiscal and monetary stimulus by supporting households and helping businesses recover, particularly MSMEs. Second, resolve trade and technology tensions by keeping communication lines open and keeping supply chains open, especially medical and food products. Third, re-assess regional priorities and consider refocusing on digital inclusion, social protection, and regional pandemic preparedness policy toolkit. Fourth, transition to a circular economy by promoting standardization, encouraging businesses to adapt and transform, developing benchmarks for progress, and raising public awareness.
Meanwhile, Tomas Alcantara, Chair of ABAC PH, outlined in his opening remarks the key ABAC priorities that are relevant for the Philippines – strengthening the services sector, supporting MSMEs, promoting infrastructure and infra finance, and harnessing digital innovation. He stressed on the importance of engaging with other economies and sharing practices, technologies, and know-hows, on taking advantage of human capital, enhancing competitiveness, and bringing regional perspectives to better understand the issues that affect us.
The virtual forum organized in partnership with Globe Business gathered around 200 guests from various government agencies including representatives of local governments, from business associations and companies in the Philippines, as well as representatives from the APEC region and other international organizations.
Presentations
- Dennis Hew, Director, APEC Policy Support Unit: Uncertainty Tests APEC’s Resilience amid COVID-19
- Dr. Abdul Abiad, Director of the Macroeconomic Research Division, Asian Development Bank: Lockdown, Loosening, and Growth Prospects for Asia and the World