THE Asia-Pacific region is expected to bounce back from the negative economic effects driven by the pandemic-related restrictions at different rates, depending largely on how respective governments will continue to handle local outbreaks.
In a research note published on Tuesday, Moody’s Investor Service said its overall 2021 outlook for the Asia-Pacific region remains negative, as pandemic shock amplified vulnerabilities and governance strength is driving asymmetric recovery in the region.
“The shape of the recovery for each economy will depend on how governments balance facilitating a return to growth against possibly competing health and fiscal objectives, and monetary and external stability. The lasting credit impact will ultimately depend on the effectiveness and persistence of governments’ containment measures, and their ability to restore fiscal strength and return to planned structural reforms,” Moody’s said.
The international credit watcher said that higher rated countries like Singapore, New Zealand and Taiwan all displayed “governance strength” in dealing with the management of the pandemic. He said Australia and South Korea, which were also highly rated, were also “reasonably effective.”
Lower rated economies, however, such as the Philippines and Indonesia, were noted to have greater local transmission and are reflective of their governance strength. An exception was Vietnam, which was lower-rated but displayed “greater policy effectiveness,” according to Moody’s.
“Effectiveness with which governments have contained outbreaks will influence their ability to restore economic output to previous peaks,” Moody’s said.
Constraints to PHL recovery
“In India, the Philippines, Hong Kong and Singapore, continuing pandemic-related constraints inhibit a complete recovery to 2019 output levels in 2021, despite our projections of relatively rapid real GDP growth,” it added.
Moody’s also warned that the travel restrictions can also weigh on countries like the Philippines which are big recipients of money sent home by migrant workers.
“Ongoing restrictions on cross-border travel that hamper the deployment of migrant labor may not only exacerbate joblessness in source countries such as Bangladesh, India and the Philippines, but also weigh on remittances, notwithstanding the resilience of such flows over the latter part of 2020,” Moody’s said.
Just last week, Moody’s Analytics, the research arm of the Moody’s Group, said the Philippines will be the last country in the Asia Pacific to regain its GDP growth level to pre-Covid levels.
The think tank’s growth projection of the country’s economy is a 9.9-percent contraction in 2020, 4.5-percent growth for this year and a 6.2-percent growth in 2022. This is in contrast to the government’s expectation that local economic growth is expected to reach 6.5 percent to 7.5 percent this year.
Image credits: Bernard Testa