Businesses across the world believe that vaccine rollouts will speed up economic recovery in 2021. Business leaders in the largest Asian economies are confident about the future and as they emerge from the pandemic, strong growth is expected.
When measuring 2021 economic growth, the Organization for Economic Development (OECD) expects China, Korea, and Indonesia to lead the way in Asia.
Strong recovery
China experienced the pandemic earlier than other countries and is managing recovery well while lockdowns are still being implemented in many other countries. Much of Western Europe and North America is still struggling.
In Korea, consumer spending decreased but this was countered by an increase in international trade with a big demand for tech products. Indonesian Finance Minister Sri Mulyani has seen evidence that the Indonesian economy is recovering.
Global economic forecaster, Oxford Economics, believes Korea will navigate the long-term effects of the pandemic best. The stock market is soaring, with foreign investors encouraged by the positive outlook. Mike Kerley, a Portfolio Manager at Janus Henderson Investors, believes that Asia is the place to look for dividend income.
Exports resilient for many Asian countries
Many Asian countries have seen exports remain resilient. This is due in part to the demand for PPE, IT equipment and computers by people working from home. At the end of 2020, China saw a surge in exports, especially in electronic devices and medical equipment. As the international economy begins to rebound, China’s role as a leading global manufacturer is likely to remain strong. Like China, Korea also experienced a rise in manufacturing and exports at the end of 2020.
Some possible risks to recovery
- Analysts note that if governments fall behind schedule on vaccine rollouts, this could affect gains. Efficient rollout is essential to a strong recovery.
- Increasing frustration with authoritarianism, poverty, unemployment, and corruption could lead to disturbances in some Asian countries.
- U.S. and China tensions continue with President Joe Biden taking a tough stance on trade and business practices. Chinese President Xi Jinping wants domestic consumer spending to grow and is encouraging strong internal supply chains and more self-reliance when it comes to technologies. The relationship between the world’s two largest economies will continue to have an effect on the whole of Asia.
The role of international trade
The Asia-Pacific region was the first to experience the pandemic and many of its economies are coming out of it first, too. Asia has experience with previous pandemics and this has probably been a factor in it doing well in comparison to other regions.
Global trade has been particularly beneficial for Southeast Asia as it is such a heavily trade-driven region. As public lockdowns gradually ease and Western governments roll out big fiscal packages, trade is rebounding and encouraging recovery.
Macroeconomic policies
Another factor in recovery has been the responsiveness of governments and although most governments in Southeast Asia were not able to match the large fiscal packages of Western countries, fiscal policies have played a critical role in limiting the economic and social consequences of the pandemic.
The actions of some of the central banks in the region were also significant. In Indonesia and the Philippines, they financed much of the budget deficit of the governments.
Promising trade outlook
While the major demand for PPE and electronics is likely to lessen, there will probably continue to be strong global demand with major economies on the path to recovery. A surge in U.S. demand could be in the pipeline with the scale of the U.S. fiscal stimulus and pent-up savings.
