KUALA LUMPUR — The International Monetary Fund (IMF) believes Asia’s fast-growing economies will “come to a standstill” due to the coronavirus pandemic, faring worse than during the 2008-9 global financial crisis or the 1997-98 Asian crash.
The region will experience zero growth for the first time since the 1960s, said Chang Yong Rhee, director of the IMF’s Asia and Pacific Department, who forecast that the economic impact of the pandemic will be “severe, across the board, and unprecedented.”
Speaking during a press conference live-streamed from Washington, Rhee said Asia faces “a crisis like no other” due to the pandemic, which has killed over 136,000 people worldwide and prompted governments to impose lockdowns that have hampered commerce.
“Containment measures are severely affecting economies,” Rhee said.
Though Asia will “fare better than other regions,” it will nonetheless be hard-hit, in part due to a “deterioration of external demand” in Europe and North America, where severe recessions are expected.
On Tuesday, the IMF predicted that “the Great Lockdown” will cause the worst global downturn since the Great Depression of the 1930s.
Unlike during the 2008-9 crisis, economic growth in China, Asia’s biggest economy and where the pandemic originated in late 2019, will plummet – from 6.1 per cent in 2019 to 1.2 per cent this year.
Economies that depend on trade with China, such as Australia and those of South-East Asia, will likely see sharp recessions.
The IMF forecasts contractions of 6.7 per cent for Australia and Thailand, with Malaysia likely to see its economy shrink by 1.7 per cent, slightly-less than the 2 per cent decline forecast by the country’s central bank.
A new report by the secretariat of the Association of Southeast Asian Nations (ASEAN), a regional inter-governmental organization, warned that member states will be slammed by a combination of slowdown in China and travel bans imposed due to the pandemic.
The secretariat said that tourism in South-East Asia “benefits from the large influx” from China, while across the region, “supply chains are heavily integrated with China’s manufacturing sector.”
Indonesia and the Philippines will see growth flatten to around one per cent, with recessions only kept at bay due to the weight of consumer spending by their large populations.
The collapse in oil prices since the onset of the pandemic will also hit energy-dependent economies hard, the IMF outlined, with East Timor, which depends on energy revenues for almost all government spending, facing a 3 per cent contraction.
Elsewhere, factors such as “reduced tourism, disrupted trade and manufacturing” will weigh heavily, according to the IMF.
Japan, Asia’s second-biggest economy, could shrink by 5.2 per cent. While Cambodia, where tourism makes up almost a fifth of gross domestic product, is facing negative growth of 1.6 per cent – a steep decline compared to the 7 per cent growth the country has enjoyed most years over the past decade.
Countries across Asia have announced huge government spending proposals aimed at cushioning the economic impact of the pandemic.
According to economists at Dutch bank ING, “countries with deep pockets,” such as Australia and Singapore, will be better able to live up to their spending plans.
Some countries have included measures such as loans and tax breaks in fiscal plans, suggesting that the cash available to help hard-pressed businesses is less than it appears on paper.
According to ING, “those with weaker financial positions, Malaysia, Indonesia, have had to bulk the packages out more and their genuine fiscal support is typically lower.”