Paris, 31 July 2020 - Emerging Asian economies will contract by an average of -2.9% in 2020 as a result of the COVID-19 crisis. The pace of growth is at historic lows in most countries of the region, which encompasses the ASEAN-10, China and India.
In ASEAN, growth is projected to shrink by an average of -2.8%, according to the OECD’s Economic Outlook for Southeast Asia, China and India 2020–Update: Meeting the challenges of COVID-19, released today. Headline inflation in the region remains moderate overall, while current account balances are expected to weaken in the coming quarters.
Countries in Emerging Asia that have managed to contain the virus are beginning to recover, while India, Indonesia and the Philippines still face rapidly rising case counts and are struggling to regain their economic footing. Lockdowns and restrictions on movement in response to the health crisis have come at great cost to economic activity. Financial markets and the banking sector are suffering, businesses are facing lower income and rising debt, and households are exposed to rising risks due to job losses and subdued prospects for labour. The crisis has disrupted global value chains as never before, with profound implications especially for countries highly dependent on imports.
The scale of the fiscal response is unparalleled, with policies targeted at providing economic support to buoy growth. Monetary policy rates have been lowered by 30 to 300 basis points since the end of 2019, while some countries also eased reserve requirements for banks. Fiscal support was mostly provided through tax relief or direct subsidies to the most affected businesses and households. Indonesia, Malaysia, Singapore and Thailand unveiled multiple fiscal stimulus packages. The budgetary effort related to COVID-19 calls for prudence to keep fiscal policies on a sustainable path, in particular in those countries where fiscal buffers were already low before the crisis.
With record expansion of telework, video-conferencing and digital teaching in the context of global lockdown measures, the pandemic demonstrated the importance of digitalisation. To benefit from this trend, Emerging Asia needs to improve access to digital services, including the Internet, and to increase digital literacy. Digital payments should be facilitated to support e-commerce.
The crisis battered the region’s important travel and tourism sectors. In addition to emergency support, these sectors require plans to encourage domestic tourism, prepare for the return of international tourists and offer training to workers whose jobs may not be restored. Likewise, health sectors need to develop policies to cope with future outbreaks. Regional co‑operation will be a critical factor of success.
The report benefitted from the support of the governments of Japan, Korea and Switzerland, and the European Union.
For further information on the Update of Economic Outlook for Southeast Asia, China and India, please visit: www.oecd.org/dev/asia-pacific.
Journalists are invited to contact Kensuke Tanaka, Head of Asia Desk, OECD Development Centre (Kensuke.Tanaka@oecd.org, tel. +33 6 27 19 05 19), or Bochra Kriout at the OECD Development’s Centre Press Office (Bochra.Kriout@oecd.org, tel. +33 1 45 24 82 96).