Asia-Pacific growth unlikely to recover without significant cooperation

Respondents to a PECC survey do not anticipate a swift rebound from the crisis in 2021 with growth levels for the Asia-Pacific remaining below 2019 levels for the next 3-5 years.

The survey of 710 policy experts from business, academia, government and civil society was conducted from 19 May to 12 June, 2020. An analysis of the responses also provides insights for further commentary on the regional outlook and the strategies available for transitioning out of the current situation.

One of the great uncertainties is when and how to leave the lockdowns that have been the first response to the virus that would help to restart economic growth.

The response was clear - the top pre-conditions for leaving from lockdown were all related to public health issues such as the medical capacity to deal with the number of cases and evidence that number of new cases was reducing. After the medical conditions came the economic considerations and the need for international cooperation highlighting the nature of the pandemic as a global concern.

“The extraordinarily pessimistic view amongst respondents has important consequences. International cooperation would send a strong signal about the future even as governments and societies deal with the crisis. Without a vision to provide a long-term strategic framework for regional governments and stakeholders to plan for the future, there is a risk that the recovery will be much slower than need be” said Mr Eduardo Pedrosa, one of the authors of the report.

One immediate set of short-term signals will come as APEC convenes regional trade ministers to discuss their response to the Covid-19 pandemic.

“Trade has been an essential part of the toolkit for dealing for the pandemic. Keeping borders open is and facilitating the movement of these products is part of the pandemic response,” said Christopher Findlay from the Australian National University, co-author of the report.

Another recommendation was to build better information about where medical supplies are and their supply chains. The breakdown in supply chains, the surge in demand as well as the adoption of export restrictions during the crisis has made this a problematic issue. The report suggests the creation of a Medical Equipment Market Information System.

Furthermore, even when medical supplies are available they need to be transported across the world and those shipments are done by people working along the supply chain – air and sea crew. The lack of international agreements on the movement of essential workers could lead to blockages in these supply chains.

Respondents identified lasting consequences of the Covid-19 crisis for business in the region. A total of 98% agreed that the crisis would lead to the accelerated growth of the digital economy. While the digital economy has been a lifeline for millions during the crisis, millions more are at risk of exclusion with restrictive policies and the lack of international cooperation slowing the adoption of technology.

“Unlike previous economic crises, connectivity has been badly hit. To stop the spread of the virus borders have been closed and as the report shows this has had repercussion not only for tourism but also trade. Conversely people have become even more connected via digital platforms. This makes progress on the region’s agenda for connectivity an enormous challenge – to keep people safe as economies re-open and to promote economic growth. Amidst unprecedented challenges, we should call for stronger international cooperation and grasp new opportunities,” said Ambassador Su Ge, co-chair of PECC.

“The findings the report make it clear that what is needed is a long-term strategic plan for the region. Prior to the crisis we were working on a post-2020 vision for the Asia-Pacific – the exigencies of the crisis make that vision all the more important. Millions of people and business are out of work and as shown by the results of our survey, people are pessimistic. A vision that makes it clear that regional economies will stay the course towards reform in the pursuit of sustainable and inclusive growth will provide a strong signal for stakeholders,” said Don Campbell, co-chair of PECC.

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icon State of the Region Report: Impact of the Covid-19 Crisis

CONTENT

I MESSAGE FROM THE CO-CHAIRS OF PECC

II EXECUTIVE SUMMARY

III CHAPTER 1: THE ECONOMIC IMPACT OF THE COVID 19 CRISIS

OUTLOOK FOR THE ASIA PACIFIC REGION

Figure 1.1: Daily and Total Number of Infections
Figure 1.2: The Spread of the Virus Across Regions
Figure 1.3: Impact of the Covid-19 Crisis on Asia-Pacific Economic Growth
Figure 1.4: Impact of the Covid-19 Crisis on Unemployment in the Asia-Pacific

WILL THE RECOVERY BE A V, W, A U OR A SWOOCH?

Figure 1.5: Perceptions of Economic Growth over the next 5 years
Figure 1.6: Average Asia-Pacific Weighted Growth Index

RISKS TO GROWTH

Figure 1.7: Risks to Growth
Figure 1.8: Comparison of Risks: 2019 and 2020
Figure 1.9: Protectionism as a Risk to Growth
Figure 1.10: Forecast for World Trade Growth
Figure 1.11: Global Growth During the Great Depression
Figure 1.12: Impact of the Global Financial Crisis on Merchandise Trade Growth
Figure 1.13: Impact of the Covid-19 Crisis on Merchandise Trade Growth

IV CHAPTER 2: FROM SURVIVAL, STIMULUS AND EXIT STRATEGIES

FISCAL RESPONSES AND FINANCIAL MARKETS

Figure 2.1: Change in Policy Rates since the Crisis
Figure 2.2: Fiscal Stimulus by Asia-Pacific Economies
Figure 2.3: Indicators of Financial Vulnerability
Figure 2.4: Asia-Pacific Composite Index of Equity Markets (1/1/20=100)
Figure 2.5: Asia-Pacific Composite Index of Exchange Rates (1/1/20=100)

THE MECHANICS OF LEAVING THE LOCKDOWN

Figure 2.1: Change in Policy Rates since the Crisis
Figure 2.2: Fiscal Stimulus by Asia-Pacific Economies
Figure 2.3: Indicators of Financial Vulnerability
Figure 2.4: Asia-Pacific Composite Index of Equity Markets (1/1/20=100)
Figure 2.5: Asia-Pacific Composite Index of Exchange Rates (1/1/20=100)
Figure 2.6: Factors for Consideration for Exiting from Lockdown
Figure 2.7: First and Second Order Issues for Exiting from Lockdown
Figure 2.8: Differences between Emerging and Advanced Economy Responses on Priority Issues for Exiting from Lockdown

LONG TERM IMPACT ON BUSINESS

Figure 2.9: Please indicate your level of agreement/disagreement with the following statements about the lasting consequences of the COVID-19 crisis on the ways in which business is conducted Long Term Impact on Business

THE ACCELERATED GROWTH OF THE DIGITAL ECONOMY

Figure 2.10: Business App Downloads Figure The Accelerated Growth of the Digital Economy
Figure 2.11: The Link Between Business App Downloads and Workplace Closures Opportunity for More Inclusive Education with Digital Technology

OPPORTUNITY FOR MORE INCLUSIVE EDUCATION WITH DIGITAL TECHNOLOGY

Figure 2.12: Video-Conference Downloads
Figure 2.13: The Link Between School Closure and Video-Conference Downloads Will Supply Chains be More Localized?

WILL SUPPLY CHAINS BE MORE LOCALIZED?

Figure 2.14: Will Supply Chains be more localized? Better Living Conditions for Migrant Workers
Figure 2.15: Improved living and working conditions for temporary migrant workers Connectivity: Jobs and Trade

BETTER LIVING CONDITIONS FOR MIGRANT WORKERS

CONNECTIVITY: JOBS AND TRADE

Figure 2.16: Impact of Covid-19 on International Travel
Figure 2.17: International Tourism Receipts as Percentage of GDP
Figure 2.18: Asia-Pacific International Travel Restrictiveness
Figure 2.19: Evolution of Adoption of Travel Restrictions in the Asia-Pacific Rebuilding Confidence in Travel: Bubbles and Fast Lanes State Support for Air Transport The Role of Government in the Post-Crisis Era

THE ROLE OF GOVERNMENT IN THE POST-CRISIS ERA

Figure 2.20: Government management is likely to cover almost all aspects of the economy, including international trade and the domestic economy to cover almost all aspects of the economy, including international trade and the domestic economy
Figure 2.21: Government management is likely to be targeted on safeguarding people’s lives and measures to ensure essential health supplies
Figure 2.22: Change in Government Expenditure % GDP for Selected Regional Economies Figure 2.23: Government Expenditure % GDP for the Asia-Pacific

V CHAPTER 3: AGENDA FOR COOPERATION

Figure 3.1: Priority Issues for Regional Cooperation

PANDEMIC PREPAREDNESS PRACTICES

VACCINE DEVELOPMENT

TRADE POLICY ISSUES

Figure 3.2: Trade Restrictive Measures Adopted by Asia-Pacific Economies
Figure 3.3: Trade Liberalizing Measures Adopted by Asia-Pacific Economies

INFORMATION SHARING

Figure 3.4: First and Second Order Priorities for Regional Cooperation

PROTOCOLS ON THE INTERNATIONAL MOVEMENT OF WORKERS INVOLVED IN SUPPLY CHAINS

Box: APEC's Key Role

CONTACT TRACING

Figure 3.5: Government is encouraged to apply ICT and other innovative technologies to contact trace to control the spread of COVID-19
Figure 3.6: Smart Phone Penetration: Selected Asia-Pacific Economies
Figure 3.7: Evolution of Contact Tracing Policies in the Asia-Pacific

CAPACITY BUILDING FOR RECOVERY

Figure 3.8: Rating of Capacity Building Activities for a Post-Covid Recovery

STRUCTURAL REFORMS

Figure 3.9: Structural Reforms
Figure 3.10: Digital Social Payments
Interview with Cindy Hook, Chief Executive, Deloitte Asia Pacific

VI CHAPTER 4: IMPLICATIONS FOR A POST-2020 VISION FOR APEC

Recommendations

VII APPENDIX: RESULTS OF SURVEY OF ASIA-PACIFIC POLICY COMMUNITY

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