WASHINGTON – Successful containment of Covid-19 in some countries of East Asia and the Pacific will support a recovery of domestic economic activity, the World Bank said on Friday (March 26) in its annual economic update for the region.
But lingering infections in other countries will be a drag on growth until wider implementation of vaccines, it warned.
“The economies of the region have begun to bounce back, but we have what we call a three-speed recovery,” World Bank chief economist for East Asia and the Pacific, Dr Aaditya Mattoo, told The Straits Times.
“We are not seeing the kind of international cooperation which would give us durable liberation from this pandemic,” he warned.
“Unless we prioritise vaccination where there is infection, these types of new variants can very quickly erode whatever progress we are making.”
China, Vietnam emerge strongest
“First, only China and Vietnam have both rebounded and are seeing a meaningful recovery,” Dr Mattoo said.
“They’re back to where they were before Covid-19 struck, and are on a path to accelerated growth, because they had far less scarring during the pandemic.”
Other major economies of the region have seen a rebound but not really a recovery, he said. Their output is still about 5 per cent below pre-pandemic levels, and growth will be less spectacular because they have seen deeper scarring.
Worst off are the small island economies of Fiji, Palau, and Vanuatu, where there is neither rebound nor recovery, Dr Mattoo said.
International cooperation inadequate
“The big positive sign has been the fact that we now have vaccines, and they hold out the hope of containment,” Dr Mattoo said.
“The second positive is technological acceleration,” he said. “It’s the capacity to reach people, poor people, everybody.”
“The third is the change in international climate in a way that favours greater collective action.”
“And that requires cooperation between north, south, east and west, in production, in approval, and allocation. We’re not seeing that yet. And that, I think, is extremely myopic. I think the old suspicions are still inhibiting that new cooperation.”
China’s role key
“The big picture point is that there are huge gains from international cooperation, and China can play a really important role in that,” Dr Mattoo said.
“When you take something like vaccines and non-pharmaceutical interventions like test kits, China has the capacity to produce and share without having that great urgency of need. And it makes sense for the world, because the faster you suppress infection, the less risk there is of these new variants emerging, which could undermine the benefits of vaccination – for everybody.”
China also has the capacity to contribute on the fiscal and climate change dimension, he added.
“Global economic recovery, supported in part by the significant United States stimulus, will revive trade in goods and could provide an external boost to growth of as much as one percentage point on average,” the World Bank said in its report, which focuses on developing countries.
“But global tourism is expected to remain below pre-pandemic levels till 2023 and delay economic recovery in tourism-dependent economies,” it cautioned.
In 2021, China and Vietnam are expected to grow by 8.1 per cent and 6.6 per cent respectively.
The rest of the region will grow about 4.4 per cent on average – or about 0.4 percentage point slower than pre-crisis growth.
In Indonesia and Malaysia, output is expected to recover to pre-pandemic levels over the course of this year. But in Thailand and the Philippines, output is projected to remain below pre-pandemic levels for much of next year as well.
“The countries with the weakest performance were the ones that suffered high rates of Covid-19 infections and mortality; that relied more on prolonged restrictions on mobility rather than an effective test-based strategy; that depend on earnings from tourism rather than exports of manufactured goods, especially electronics; and whose governments had limited fiscal space,” the report said.
The economic distress has meant a setback for poverty reduction. Poverty in the region stopped declining for the first time in 20 years, leaving 32 million people in poverty who would otherwise have been lifted out.
Inequality also increased because of the disease and the resulting shutdowns, as well as unequal access to social support and digital technologies.
Inequalities between and within countries is a big risk, Dr Mattoo warned.