Coronavirus: Asian governments will have to decide which sectors, firms should be saved from pandemic

After the Covid-19 pandemic, some economic sectors may no longer be viable, says Changyong Rhee, director of the IMF’s Asia and Pacific Department

Asia’s growth is expected to contract by 1.6 per cent compared to the IMF’s zero growth projection in April

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A health worker checks the temperature of a resident outside a containment zone in Hyderabad, India, on Tuesday. India’s economy is set to contract by 4.5 per cent this year due the Covid-19 pandemic. Photo: AFP

Published: 10:00pm, 30 Jun 2020Updated: 1:03am, 1 Jul 2020

The impact of the coronavirus pandemic on Asian economies could be much more severe and last longer than initially expected, especially if a second wave of infection takes off, according to a top International Monetary Fund official.

Policymakers will face tough choices as to which economic sectors and businesses should be supported or saved, said Changyong Rhee, director of the IMF’s Asia and Pacific Department, in an exclusive interview with the South China Morning Post.

Within Asia, only China has the demand and financial space to support growth and to avoid economic contraction this year, Rhee said. But at the same time he downplayed hopes that, even with China expected to make a positive contribution to Asian growth in 2020, domestic demand within the region can compensate for slumping external trade.

“That is why our forecasts are lower in the [June] regional economic outlook,” Rhee said, referring to the IMF’s latest World Economic Outlook Update.

Changyong Rhee, director of the IMF’s Asia and Pacific Department, says the fallout from the coronavirus pandemic could be severe on the region. Photo: AFP

According to the update, China’s economy is seen growing at 1 per cent in 2020, while Japan and India will contract by 5.8 per cent and 4.5 per cent, respectively. Asean’s five biggest economies, meanwhile, are expected to shrink by 2 per cent.