The spread of the highly contagious COVID-19 Delta variant has cast a shadow on Southeast Asia and limited economic recovery for the region this year, especially for countries with low levels of COVID-19 immunity. The economies of several countries are expected to have contracted in the third quarter of this year, but the outlook for the region in 2022 is more positive, according to the latest Global Economic Forecast Report from ICAEW and Oxford Economics.
|COVID-19 immunity is key to Southeast Asia’s economic recovery from the Delta variant |
The Global Economic Forecast Report predicts that economies with low immunity levels face the greatest risks moving forward. As the Delta variant triggers a renewed surge in COVID-19 cases, certain countries remain vulnerable to its impact, due to having slower vaccination rollouts and higher exposure to global supply chain disruption.
Asian economies have experienced varying degrees of success in containing the Delta variant, because of differing rates of vaccination and social distancing restrictions. On one end of the spectrum, significant waves of infections in Vietnam, Malaysia, Philippines, and Thailand in the last quarter mean those countries face a delayed recovery in 2021, according to the report, but they should see a significant rebound in 2022, once vaccination rates are higher and lockdowns are lifted.
On the other end, Singapore, Hong Kong, and China have recorded much lower cases. Despite some fallout from the Delta variant, which has resulted in tighter restrictions in the third quarter of this year, the outlook for 2022 for these economies is robust, because of high vaccination rates and successful use of targeted restrictions.
GDP in Singapore is projected to grow by 6.4 per cent this year, similar to the forecast in ICAEW’s last report, with further easing of COVID-19-related restrictions over the coming quarters likely given that over 80 per cent of the population is now fully vaccinated. Although the pace of reopening will remain gradual given the government’s cautious approach to the pandemic, momentum is expected to rise in Q2 of 2021 as restrictions ease. With pent-up demand supporting growth in the coming quarters, Singapore’s GDP is forecast to grow at a solid pace of 4.1 per cent in 2022.
Recovery prospects remain dim in the short-term for countries such as Vietnam, the Philippines, and Thailand, which continue to battle against the spread of the virus. Heavily export-oriented economies like Vietnam remain dependent on the recovery of the manufacturing sector. Nonetheless, Vietnam’s GDP is projected to grow by 5.4 per cent (revised down from 7.6 per cent in ICAEW’s last report) in 2021, before accelerating to 7.5 per cent in 2022. The pick-up in growth will be driven by restrictions easing and industrial recovery gaining traction around mid-2022.
Mark Billington, ICAEW managing director International, said that, “The COVID-19 Delta variant has derailed the recovery process for most Southeast Asian economies and the reality of living with COVID-19 as endemic is proving to be complex. Not only do governments have to implement appropriate restrictions and measures to curb the spread of the variant, but they also need to speed up their vaccination rollouts to achieve immunity, in order to improve their prospects for growth.”