SINGAPORE, March 31 – The ASEAN+3 region is expected to expand by 6.7 percent this year and 4.9 percent in 2022, according to the Asean Regional Economic Outlook report released here today.
Published by the ASEAN+3 Macroeconomic Research Office (AMRO), the annual report said this growth projection follows a marginal contraction by 0.2 percent seen in 2020.
In a press release, AMRO said the region had proven to be resilient in the face of the COVID-19 pandemic, but was still not out of the the woods yet.
The region, which is home to 30 percent of the world’s population, collectively accounts for only three percent of the total number of confirmed COVID-19 cases globally.
However, until herd immunity is achieved through widespread vaccinations, localized containment of the virus may continue to be necessary, it said.
“As governments become more experienced at handling infections, targeted measures that are decisive, effective, and proactive will allow economies to minimize further loss of lives while enabling economic activity to continue,” said AMRO Chief Economist Hoe Ee Khor.
The report said recovery will not be easy but there were also opportunities along the way.
Some segments will rebound quickly, with the turnaround in manufacturing and exports and the adoption of new technologies; others will remain under pressure and must adapt to new realities, move on, or reinvent themselves to survive, it said.
Meanwhile, the financial sector appears to be on a dual track. Financial markets have soared since the first quarter of 2020, on the back of unprecedented policy stimuli and the successful development of vaccines. At the same time, the pandemic has substantially weakened public and private sector balance sheets. Unprecedented policy support has come at the cost of higher public debt, while shocks to household and business incomes have affected their debt servicing capacity and increased the credit risks to banks, currently contained by regulatory forbearance measures that were introduced.
Macro-financial policymaking will have to gradually shift from protecting lives and livelihoods to safeguarding an inclusive and sustainable recovery.
Given the depth and reach of the pandemic, some permanent output losses from economic scarring will be inevitable, but the manufacturing sector and its exports will remain the key engine for growth in the region.
The pandemic exposed the vulnerability of global value chains (GVCs), which posed significant problems when lockdowns first occurred, but then facilitated a rapid regional turnaround when economic activity resumed. “We don’t think GVCs are going to be reconfigured away from Asia anytime soon,” Dr Khor stated, in response to the intensifying debate about major reconfigurations of GVCs, adding, “Asia is still one of the fastest-growing regions in the world, and we know that proximity to high-quality infrastructure, skilled labor, and customers with purchasing power all matter for GVCs.”
The report also pointed out the strengthening digitalisation in the region following the pandemic. As users become ever more comfortable with new technologies, the “flight to digital” will be a key factor in strengthening supply chains and facilitating global trade and consequently raise their competitiveness in the Fourth Industrial Revolution.
This would nonetheless require strong bilateral and multilateral cooperation to ensure the full deployment of new technologies that require both hard and soft infrastructures to be in place, it added.