Asia Continuing To Fight Back From ‘Worst Recession In Living Memory’

Economies around the world have continued to falter as world leaders try to stem the onslaught of coronavirus. With many countries closing parts of their industry and employees in their thousands continuing to lose work, it is easy to see why recessions have become something that is expected.

Asia Pacific is currently in the middle of its worst recession in living memory however the International Monetary Fund (IMF) have confirmed they believe the region is on its way to recovery.

Although the growth forecasts have once again been downgraded the IMF firmly believes that there could be a 7% bounce back next year.

So far 2020 has seen the growth forecast drop from -1.6% to -2.2%, leaving many wondering if Asia Pacific could actually recover.

The IMF has confirmed that for the region to grow they will have to rely on China. Despite allegedly being the source of the first outbreak of coronavirus, the country has been in the steady stages of recovery for some months now. However areas including Malaysia, the Philippines and India are still struggling with infections, meaning their recovery will take much longer to start.

And with lower investment in the area, the IMF believes the ‘knock-on effect’ could last until at least 2025, saying that ‘the scars will be deep.’

Another issue that could stall growth is the spiraling relationship between China and America, with the trade war continuing to deepen, especially with President Donald Trump continuing to call coronavirus ‘the China virus’.

The IMF’s acting director for Asia and Pacific, Jonathan Ostry, has confirmed that recovery could struggle saying, “This is something, for a very export-orientated region, that is going to be a big risk going forward.”

He continued saying, “We worry about decoupling of major technology hubs – not just in China and the US but more broadly, which would have the affect of diminishing hi-tech trade leading to inefficient production.”

China has released their data for the quarter between July and September, which, in comparison to 2019, highlighted an economic growth of 4.9%. These figures have helped the IMF to view China and their economy as ‘a rare positive figure in a sea of negatives’.

The IMF have confirmed they believe the area will continue to grow by around 6.9% next year however this figure is dependent on several different issues including whether the region will be able to continue containing the spread of coronavirus.

Ostry explains, “With the right policies and international support when needed, Asia’s engines can work together again and power the region ahead”.

An important aspect for Asia’s recovery is steering the economy away from a seemingly ‘over-reliance’ on exporting their goods, something which has been hampered over the past year due to many countries preferring to not deal with China in the aftermath of the outbreak. However this is a ‘work in progress’ according to the IMF.

Due to the recession many in the South Asia area are finding themselves sliding further into severe poverty according to the World Bank. Despite the IMF’s predictions, the lender predicted an economic contraction of 7.7% this year for South Asia, with employees in the unskilled sectors struggling the most.

In its bi-annual report, the bank confirmed that, “the impact on livelihoods will even be larger than the GDP forecast suggests… This implies that the region will experience a sharp increase in the poverty rate.”

The report also claimed that India could see its economy contract by 9.5%, a massive hit for the area’s largest economy.

However with the pandemic continuing to increase around the world, with many countries experiencing a second wave of infections, the economies in South Asia could continue to decrease which in turn, could cause investment from overseas investors to disappear. If this were the case government leaders would struggle to find the money to increase their spending meaning the banking systems could potentially end up under more pressure as they struggle to keep the fragile economies from going under.

At the time of writing India has had over 7.75 million confirmed cases of coronavirus with more than 117,000 deaths. In comparison China, the epicentre of the virus, has only had 85,747 confirmed cases with 4,634 deaths. America still has the highest number of infections with over 8.66 million confirmed cases and more than 228,000 fatalities. The virus, which many believe is out of control, is continuing to increase in America with nearly 75,000 new cases being reported in a 24-hour period.

In contrast, Asia has had nearly 13 million confirmed cases of the virus with just under 231,000 deaths. However they are also experiencing a second wave and saw 97,077 new confirmed cases in a 24-hour period, the majority in India. There have also been around 1500-1600 new deaths each day, again with the majority in India.