The economy of the Asia-Pacific region is leading the global recovery from the Covid-19 pandemic, said a report by Moody’s Analytics.
It said that the region’s recovery contrasts with Europe — where Greece, Italy and Spain appear to be still in recession and several other European economies are once again at the risk of recession, as a second wave of the pandemic spreads across the continent at rates much higher than last spring.
The same is true for parts of the US, where a new surge is spreading quickly and deeply, noted the report.
“The Asia-Pacific economy is leading the global recovery from the pandemic. The entire region is in recovery, driven by the control of the pandemic, the easing of lockdowns, and the improvement in global trade,” it said.
It noted that although only a few countries have reported third-quarter GDP growth rates, those which have reported as of November 13 — China, Indonesia, Malaysia and South Korea – have reported quarter-to-quarter growth.
Asia’s recovery, according to the report, is led by China, and its recovery in turn is led by exports, which have been above pre-COVID-19 levels since mid-year.
Each month through October, they have been stronger than in the prior month, driven by pent-up demand for many durable goods around the world, and by a surge in pandemic-related demand for pharmaceuticals and medical equipment as well as rising demand for electronics, computer systems, laptops, and mobile phones as the global population increasingly works and studies from home.
More recently, China’s imports have also been accelerating, an indication of the ramping up of supply chains throughout much of the Asia-Pacific region.
It said that this can be seen in the official China PMI, in which both new export orders and the import index have risen above the neutral 50 benchmark.
The PMI’s production index is as optimistic as it was in 2018 prior to the US-China trade war.
The domestic economy of China is also revving up. Retail sales rose above the year-ago level in September for the first time since the arrival of the pandemic in January.
Vietnam, Singapore, Taiwan, Malaysia, and New Zealand reported exports above those one year ago as of September. Korea’s exports also were up for the first time in September, although they fell back in October because of seasonal effects, it said.
“The pattern of trade is still narrow, with concentrations in tech industries and medical equipment and supplies,” the report added.
Trade is rising slowly in Japan, Thailand, the Philippines, Indonesia, and India but not yet nearly to pre-pandemic levels, as per the report.
The entire APAC region won’t fully recover until an extended rebound of the global economy expands the range of global trade to include more consumer goods such as automobiles and commodities such as crude oil and petrochemicals, it said.
The economic recovery in the APAC region will also not be complete until international travel and tourism flourish once again, it said, adding that this will be a long process as officials assess the pandemic control measures in the origin countries vis-a-vis their inbound travellers and tourists.
“The process has begun, however, in a very slow way, mostly allowing for limited travel for business and for permanent residents, particularly between China and several countries in the region,” said the report.
As per Moody’s Analytics, the baseline economic outlook calls for growth across the entire APAC region in 2021. The fastest growth will be in China, Vietnam, and Hong Kong, it said.
The outlook, however, is not without risks. Within the region, the risks are largely related to continued suppression of the coronavirus until a vaccine is available and provision of enough fiscal support in the near term.
The risks from elsewhere in the world are similar, the report said, adding that they are amplified many times by the waves of COVID-19 overtaking Europe and North America at this time, and by the uncertainty of the public health response or the fiscal support that will emerge in this new round.