SUPPLEMENT Lockdown, Loosening, and Asia’s June 2020 Growth Prospects Abdul Abiad Director, Macroeconomic Research, ADB 1
Ou Outline of f Disc scussi ssion • Overview of forces now reshaping Asian economies • The outlook for the region • Selected topics (depending on interest): • Investment prospects in Asia—what has happened to financial markets? • The future of globalization and supply chains • Prospects for post-COVID Asia and its role in the global economy 2
COVI VID-19 h 19 has c con ontinued t to s o spread g glob obally... Si Since Ap April, total COVID ID-19 19 cas ases worldw dwide de hav have risen n fr from less than han a a million n to over 13 13 million n by 15 15 July, wi Jul with devel eloping Asia accounting for r 14.4% of the e total COVID-19 cases worldwide, new cases daily COVID-19 cases worldwide, cumulative Sources: CEIC Data Company; World Health Organization (accessed 16 July 2020). 3
…a …and across much of developing Asia. Do Domesti tic outb tbreaks have ve occurred in more economies in th the region, with th 22 of th the ADB DB’s 46 developing members recording more than 1,000 cases each COVID-19 cases by subregion, new cases daily COVID-19 cases by subregion, cumulative Sources: CEIC Data Company; World Health Organization (accessed 16 July 2020). 4
Go Governments ts im imposed contain ainment t meas asures of va varying stringency, which reduced mobility… COVID-19 Government Response Stringency Index Stringency and mobility in developing Asia 30 MON 20 percentage change from the baseline Average mobility outside residence, 10 ROK 0 PNG TAP -10 VIE FIJ HKG -20 LAO KAZ AFG CAM East Asia THA MYA TAJ INO -30 KGZ Central Asia PAK SIN South Asia BAN -40 MAL GEO Southeast Asia SRI NEP The Pacific -50 IND Linear (Trend line) PHI -60 0 20 40 60 80 100 Average stringency index AFG = Afghanistan, BAN = Bangladesh, CAM = Cambodia, FIJ = Fiji, GEO = Georgia, HKG = Hong Kong, China, IND = India, INO = Indonesia, KAZ = Kazakhstan, KYR = Kyrgyz Republic, LAO = Lao People’s Democratic Republic, MAL = Malaysia, MON = Mongolia, MYA = Myanmar, NEP = Nepal, PAK = Pakistan, PNG = Papua New Note: The Government Response Stringency index is a composite measure Guinea, PHI = Philippines, ROK = Republic of Korea, SIN = Singapore, SRI = Sri Lanka, of nine response indicators including school closures, workplace closures, TAJ = Tajikistan, TAP = Taipei,China, THA = Thailand, VIE = Viet Nam. and travel bans, rescaled to a value from 0 to 100, with 100 being the Sources: ADB estimates using data from University of Oxford. Our World in Data . strictest response https://ourworldindata.org/grapher/covid-stringency-index; Google. Community Source: University of Oxford. Mobility Reports . https://www.google.com/covid19/mobility/. 5
…a …and affected economic activity. Q1 2020 stringency, mobility, and Q1 GDP growth declines AUT = Austria, BEL = Belgium, BGR = Bulgaria, CAN = Canda, CHL = Chile, CHN=People’s Republic of China, COL = Columbia, CYP = Cyprus, DEU = Germany, DNK = Denmark, ESP = Spain, EST = Estonia, FIN = Finland, FRA = France, GBR = United Kingdom, GEO = Georgia, HKG = Hong Kong, China, HUN = Hungary, IDN = Indonesia, ISR = Israel, ITA = Italy, JPN = Japan, KOR = Republic of Korea, LTU = Lithuania, LTV = Latvia, MAR = Morocco, MEX = Mexico, MNG = Mongolia, MYS = Malaysia, NGA = Nigeria, NLD = Netherlands, NOR = Norway, PER = Peru, PHL = Philippines, POL = Poland, ROU = Romania, RUS = Russia, SGP = Singapore, SVK = Slovakia, SWE = Sweden, THA = Thailand, TWN = Taipei,China, UKR = Ukraine, USA = Unites States, VNM = Viet Nam. Source: Abiad et al., 2020, “The impact of COVID-19 on developing Asian economies: The role of outbreak severity, containment stringency, and mobility declines,” in COVID-19 in Developing Economies , CEPR e-book. 6
Outbreak severity, stringency cy of lock ckdowns, and reduce ced mo mobility y all correl elate e with revisions to C C and I I gr growth. Regression of Consumption and Investment Revisions on Stringency, Mobility, and Outbreak Severity (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) VARIABLES Revisions to 2020 Consumption growth forecast Revisions to 2020 Investment growth forecast Average stringency -0.0653** -0.0592*** -0.0219 -0.134*** -0.122*** -0.0224 (0.0255) (0.0204) (0.0271) (0.0330) (0.0281) (0.0604) Average mobility 0.0558** 0.0530** 0.0387 0.111*** 0.107*** 0.0896 (0.0258) (0.0208) (0.0308) (0.0364) (0.0287) (0.0632) Log cases per million -0.628** -0.572*** -0.718*** -0.715*** -1.205*** -1.082*** -1.097*** -1.088*** (0.231) (0.186) (0.169) (0.165) (0.426) (0.329) (0.322) (0.327) Constant -2.962 -5.583*** -3.568** 0.285 -1.033 0.0449 -1.846 -7.409*** -3.437 4.300 -0.458 0.392 (1.783) (0.892) (1.535) (1.689) (1.191) (1.424) (2.530) (1.490) (2.721) (2.765) (2.290) (2.832) Observations 36 34 37 36 34 33 36 34 37 36 34 33 R-squared 0.192 0.181 0.189 0.349 0.430 0.455 0.226 0.226 0.196 0.384 0.410 0.411 Robust standard errors in parentheses. Collinearity between average stringency and average mobility (correlation -0.82) results in both variables becoming insignificant if included simultaneously, as in columns 6 and 12. *** p<0.01, ** p<0.05, * p<0.1 Source: Abiad et al., 2020, “The impact of COVID-19 on developing Asian economies: The role of outbreak severity, containment stringency, and mobility declines,” in COVID-19 in Developing Economies , CEPR e-book. 7
Th The global environment will be weak, as many ec econo nomies ies als also deal deal with with their their own wn outbr utbreak eaks. Major advanced economies are set to contract after already slowing in 2019. Baseline assumptions on the international economy 2020 2021 2019 ADO ADOS ADO ADOS GDP growth (%) Major advanced economies 1.7 -0.3 -5.8 q 1.8 4.1 p United States 2.3 0.4 -5.3 q 2.1 3.8 p Euro area 1.2 -1.0 -7.0 q 1.6 5.5 p Japan 0.7 -1.5 -5.0 q 0.9 2.0 p Brent crude spot prices 64.03 35.00 35.00 55.00 45.00 q (average, $ per barrel) p = upgraded forecast, q = downgraded forecast, no sign = unchanged. Sources: Bloomberg, Haver Analytics, ADB estimates. 8
We We are in the midst of a global tourism collapse, and a a full ll rec ecover ery in in tr travel el an and touris ism will ill tak ake e tim time… e… Fo For the 24 economies with tourist arrivals data available for 55% 55% o of r respo ponde ndents s sai aid t d that hat e even af n after t trav avel r restrictions ns ar are April, th Ap the year-on on-ye year decline in arrivals ranges from 87% to lift lifted, they would ld wait it six ix months to a year r or r more re before re 100% 100%. travel tr eling—or or they had set aside travel plans altog ogether. Decline in tourist arrivals, selected developing Asian economies Sri Lanka Thailand Indonesia Travel plans after bans are lifted Taipei,China Nepal Viet Nam % change year on year Rep. of Korea Hong Kong, China Georgia India Singapore Maldives February Survey April Survey June Survey 40 20 50 47% 45% 0 45 40 -20 36% 33% 35 -40 28% 30 23% 25 22% -60 20 -86.9 14% 14% -80 15 12% 8% 10 7% -100 5% 4% 3% 5 Jan 2019 Apr Jul Oct Jan 2020 Apr Jun 0 Not wait at all Wait a month or Wait six months or Wait a year or so Not travel for the two so foreseeable future Note: April data for Cook Islands is a mirror data of arrivals from AUS/NZL. Source: IATA Sources: CEIC Data Company; IMF Tourism Tracker; and country official sources. 9
…implying a substantial decl cline in tourism rece ceipts for ma many y ec economi mies es. COVID-19’s impact on international tourism receipts in developing Asia, % of GDP COO MON GEO CAM HKG ARM MYA PNG MLD SAM TON BHU NEP BRU NAU KOR PRC VAN THA FSM MAL KYR LAO TUV UZB PAK AFG BAN SOL AZE TAP KAZ PAL INO NIU RMI TAJ IND SRI SIN VIE TIM PHI KIR FIJ 0 -10 Shorter containment Longer containment -20 % of GDP -30 -40 -50 AFG = Afghanistan, ARM = Armenia, AZE = Azerbaijan, BAN = Bangladesh, BHU = Bhutan, BRU = Brunei Darussalam, CAM = Cambodia, COO = Cook Islands, FSM = Federated States of Micronesia, FIJ = Fiji, GEO Georgia, HKG = Hong Kong, China, IND = India, INO = Indonesia, KAZ = Kazakhstan, KIR = Kiribati, KYR = Kyrgyz Republic, LAO = Lao People’s Dem. Rep., MAL = Malaysia, MLD = Maldives, MAR = Marshall Islands, MON = Mongolia, MYA = Myanmar, NAU = Nauru, NEP = Nepal, PAK = Pakistan, PAL = Palau, PNG = Papua New Guinea, PRC = People’s Republic of China, PHI = Philippines, KOR = Republic of Korea, SAM = Samoa, SIN = Singapore, SOL = Solomon Islands, SRI = Sri Lanka, TAP = Taipei,China, TAJ = Tajikistan, THA = Thailand, TIM = Timor-Leste, TON = Tonga, TUV = Tuvalu, UZB = Uzbekistan, VAN = Vanuatu, and VIE = Viet Nam. Source: Abiad et al., forthcoming. 10
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