The Financial Situation of Asia After Corona

The Financial Situation of Asia After Corona

by September 1, 2020
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When the coronavirus first emerged in the region of Asia in January, many predicted that it would have a damaging impact on the region’s economies and potentially trigger a recession.

However, few would have anticipated that coronavirus would evolve into a global pandemic, or that the economic consequences in Asia (and indeed, throughout the world) would precipitate a significant slowdown through 2020 and 2021.

In this post, we’ll explore the socio-economic impact of the virus so far, while appraising the near and medium-term outlook for the Asian economy.

How has Asia been Impacted by Covid-19?

Interestingly, the majority of Asian nations have managed to avoid falling into a technical recession, many will continue to flirt with this risk throughout Q3 and Q4 of 2020.



This includes China, who have survived amid falling retail sales and fixed asset investments but remain vulnerable to the risk posed by a second spike. Similarly, Korea remains on the precipice of a recession following disappointing Q2 data, with the decline in exports and manufacturing driving a significant downturn.

The risk is even more pronounced in countries such as the Philippines, where the government is struggling to contain domestic outbreaks of the virus and remains unable to open vast swathes of its economy fully.

This uncertain climate is reflected by the performance of Asia’s emerging currencies, which have continued to struggle for direction through Q2 and Q3. The trail-blazing Chinese yuan embodies this trend, as it lost considerable ground at the beginning of the week after reaching a seven-month high against the USD at the end of July.

Of course, this trend has also been compounded by the quantitative easing measures rolled out by various Asian governments, in a bid to minimise base interest rates and the socio-economic impact on households.

GDP Growth and the Outlook for Asia

At this stage, we can see that many nations have so far avoided the worst-case scenario predicted at the outset of the virus, but the question that remains is can they continue to hold on for the remainder of 2020 and beyond?

This remains unclear at present, with GDP growth in Asia forecast to stall at zero percent by the end of the year. Worryingly, this represents the worst growth performance in nearly 60 years, including the great recession of 2008 and the Asian financial crisis of 2007.

Growth declined to 4.7% and 1.3% during these respective crises, with these figures set to be dwarfed by a contraction to zero percent over the course of the next two quarters.

The only positive news here is that Asia may be set to outperform a number of other regions during the next four months, including the US and the UK.

More specifically, GDP growth in the states and the Uk are expected to decline by 6% and 6.6% respectively, while China will see its own growth depreciate by 4.9% during the same period.

Sure, this is far from ideal, but it suggests that Asia may be in a better economic position than most and best placed to lead the global recovery in 2021.

 

Featured image credit:Technology photo created by freepik – www.freepik.com

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