Advertisement
Advertisement
Coronavirus pandemic
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
A family is seen in a shanty home in Tondo, Manila. The effects of the Covid-19 pandemic are especially severe in emerging parts of Southeast Asia. Photo: Reuters

Coronavirus pandemic puts millions of middle class Southeast Asians at risk of poverty

  • Southeast Asia has boomed in recent years but the ADB sees it second to the Indian subcontinent in charting the number of new poor this year
  • The region’s top five economies spent billions in income support but informal workers – 76 per cent of those employed – often fall through the cracks
As the coronavirus pandemic derails economies worldwide, many of the newly poor will come from Southeast Asia, dealing a huge setback to a region that had been prospering from a surging middle class.

The job losses are pausing the outsize boom Southeast Asia has experienced in recent years, with economies possibly taking years to fully recover.

In the Philippines, which has the most Covid-19 cases in Southeast Asia, a survey released on October 6 by the World Bank and local agencies showed almost half of closed businesses were unsure when they could reopen. The extended effects of the nation’s lockdown have been devastating to people like Manila resident Jenn Piñon, 35, who spent years working on a fine arts degree she hoped would make her financially secure.

Instead, she has lost contracts she had won as a graphics designer, leading her to turn to selling eggs and hummus online. She has also been living in a friend’s unused condominium unit to keep living expenses low.

“I didn’t expect it at all,” Piñon said of the work she has lost. “I have to thank God that he gave me enough savings for now. Let’s just hope it lasts.”

Covid-19 takes food out the mouths of Vietnam’s waste pickers

While incomes have plunged worldwide, the pandemic’s effects are especially severe in emerging parts of Southeast Asia, where a wave of job losses and weak social safety nets mean millions are at risk of losing their rung on the social mobility ladder.

The region is likely to come in second behind the Indian subcontinent in charting the number of new poor in Asia this year, said Ramesh Subramaniam, Southeast Asia’s director general at the Asian Development Bank (ADB) in Manila.

A lack of consumer demand, impending bankruptcies and social-distancing measures continue to impinge on the job market, according to Priyanka Kishore, an economist at Oxford Economics.

“In all, this points to a long, drawn-out recovery,” she said. “We estimate Southeast Asia’s GDP to be 2 per cent below the pre-Covid baseline even in 2022.”

Bain & Co. last year forecast that Southeast Asia would add at least 50 million consumers to the ranks of its middle class by 2022. The prospect of US$300 billion in disposable income attracted the likes of Toyota and Ikea to expand here. Now, disappearing incomes are stalling growth, as consumption represents about 60 per cent of the gross domestic product of the region’s major economies other than Singapore, says the Washington-based Center for Strategic and International Studies.

A man sorts through sacks of plastic garbage in a junk shop in Manila, Philippines. Photo: Reuters

As many as 347.4 million people in Asia-Pacific could fall below the US$5.5 a day poverty line because of the pandemic, according to the United Nations University World Institute for Development Economics Research. That is about two-thirds of its worst-case global estimate, and underscores the World Bank’s forecast of the first net increase in worldwide poverty in more than two decades.

The toll has been tough on people like Adi Muhammad Fachrezi in Indonesia. He became the first in his family to go to college in 2014. Showing tourists around Java’s towering volcanoes and white sand beaches earned him about 20 million rupiah (US$1,357) a month and covered tuition and board.

But that income has dried up as the virus has kept tourists away and he has had to put his studies on hold. “I’m kind of ruined financially now,” said Fachrezi, 24.

Coronavirus could push 160 million more into poverty across Asia, ADB warns

The magnitude of the economic free fall in Southeast Asia’s five biggest economies was severe in the second quarter. Indonesia shrank 5.3 per cent year on year, Malaysia 17.1 per cent, the Philippines 16.5 per cent, Singapore 13.3 per cent and Thailand 12.2 per cent, data compiled by Bloomberg shows.

Vietnam, which was among the few trade-war winners, will see its three-decade economic ascent grind to a near halt this year.

Contractions could persist through early next year, HSBC said, amid withering manufacturing and a tourism drought.

People line up to pay at a supermarket in Malaysia. Photo: Reuters

Having weathered political upheavals, financial crises and natural disasters, Southeast Asia is no stranger to setbacks. Yet, unlike previous events that pushed millions in the region into joblessness and poverty, such as the Asian financial crisis and 2004 Indian Ocean tsunami, there are no other labour or export markets to run to this time.

That is signalling a prolonged financial squeeze for Southeast Asians. ADB’s Subramaniam estimates improvements in income and poverty numbers lag an economic rebound by two to three years. The International Labour Organization estimates that time at work equal to at least 48 million full-time jobs disappeared in the region in the second quarter.

Coronavirus Malaysia: amid resurgence, country asks what went wrong

For months, Farah, 28, who asked to be identified only by her first name, has been futilely looking for a job in the Malaysian capital, Kuala Lumpur. Furloughed from a teaching post at a tutorial centre in March, she has been relying on her husband’s modest pay from his job in a retirement home and a little government aid.

“We only eat what is necessary to keep us full,” she said. Her situation lies in stark contrast to a middle-class upbringing. Farah’s life now resembles that of her father’s tough childhood, which the patriarch overcame and landed a cushy government post that afforded her a private college education.

Farah and her husband almost became homeless after their lease expired during lockdown. They had to borrow money from relatives for their apartment’s deposit fee.

Southeast Asia’s top five economies have each spent billions of dollars in income support to cushion the pandemic’s blow. Despite the efforts, social protections such as unemployment benefits across the region, excluding Singapore, remain “often not as good as they should be”, said Christian Viegelahn, an economist at the International Labour Organization.

The region’s governments on average spend only 2.7 per cent of GDP for such programmes, far below the 10.8 per cent global ratio, he said. Informal workers, which represent 76 per cent of Southeast Asia’s total employment, often fall through the cracks, he said.

Singapore firms in ailing industries struggle to get loans amid credit tightening

Back in Java, Fachrezi is trying to look forward. He wants to rebuild his tour-guide business, finish his communications course and still be the first in his family to earn a college degree.

“My best hope is that my business can operate again at the end of the year to coincide with the holiday season,” Fachrezi said.

That hope is a tenuous one – virus cases in Indonesia have continued climbing in one of the region’s biggest outbreaks.

Post