Coronavirus: Asia’s economic recovery losing momentum as Delta variant knocks wind out growth
- The rapid spread of the highly infectious Delta variant and low vaccination rates have caught much of Asia off guard
- While year-on-year corporate and economic indicators continue to show strong recovery, quarter-on-quarter indicators reveal flagging momentum
Asia’s robust economic recovery from last year’s coronavirus low is losing momentum as a surge in Covid-19 cases sees shops empty again and factories close, dimming prospects for corporate profit growth after a blockbuster half year.
“It’s clear that economies across the region are suffering more from Covid-19 than they previously did. The biggest factor is that Asia is poorly vaccinated,” said Rob Carnell, Asia-Pacific head of research at ING in Singapore.
While year-on-year corporate and economic indicators continue to show strong recovery, flattered by comparisons with 2020s sharp declines, quarter-on-quarter indicators reveal flagging momentum.
There’s no mistake there will be a slowdown in the third quarter,
Asia’s biggest firms are likely to post their first quarter-on-quarter profit decline in six quarters in July-September, falling 6.19 per cent, showed a Reuters calculation based on Refinitiv Eikon analyst data of 1,069 companies with market capitalisation of at least US$1 billion.
“There’s no mistake there will be a slowdown in the third quarter,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
In the near-term, much depends on vaccination progress in Southeast Asia – a major production base – and whether China takes extra steps to support its economy, Fujito said.
Vehicle sales in China, the world’s second-largest economy, slipped in July versus the same month last year, falling for a third consecutive month amid virus outbreaks and a global semiconductor shortage which is curbing output.