Macroscope | Why Southeast Asian economic growth is safe from Covid-19 Delta ravages, for now
- As long as government spending remains robust and monetary policies accommodative, the Delta outbreak in the region is unlikely to arrest its growth momentum
- But if the pandemic is significantly prolonged, long-term economic scarring, as reflected in a rise in unemployment and poverty rates, is the more worrying danger
This has led some to wonder whether the Delta variant marks a new beginning, rather than the beginning of the end, of the pandemic, raising concern that nascent economic recoveries in the region could be derailed.
Conflicting signs are emerging from forecasters. In August, HSBC reduced full-year growth estimates significantly for all major Southeast Asian economies except Singapore. The Asian Development Bank was less pessimistic in its July revision of its April forecasts, downgrading its growth outlook for the Asean region only marginally, from 4.4 per cent to 4 per cent for 2021.
Strong growth was reported in the second quarter of 2021, after either negative or flat growth in the first quarter, on a year-on-year basis. The countries with the deepest recessions or the sharpest drops in the second quarter of 2020 recorded the strongest rebound in the corresponding quarter of 2021 (the gains came off the low bases of 2020).
