As the U.S. focuses on its own battle with Covid-19 — hitting some 200,000 deaths over the weekend and seeing total diagnoses of the disease reach nearly 6.8 million — the world is also hurting with more than 30 million total known infections. The toll on global economies is uneven and painful, too, as some nations that locked down hard and early are seeing improvement now, while those slow to act are getting repeatedly socked on the chin.
Who could have imagined in late January that by now much of East Asia would have gained control over the novel coronavirus that originated in China, but places like the U.S., Brazil, India and parts of Europe would be still in the fight?
Taking stock of which nations in Asia are rebounding and which are not, was a score-card report out last week by Oxford Economics, showing a reshuffling of growth prospects for the region. Among its findings were that New Zealand, Taiwan and Singapore are recovering the most quickly, while Hong Kong, Indonesia and India are lagging. Japan, Australia and China were among those in the middle of the group’s recovery score card.
For insight into the report and how economies are recovering or not from Covid-19, TheStreet spoke with the report’s author, Oxford’s lead economist, Priyanka Kishore, head of India and South East Asia economics, by email this weekend. Following is an edited version of the exchange.
TheStreet: Looking back to, say, February, could you ever have expected that so much of the world, including and especially the U.S., would be still loosing ground to Covid-19 by now?
Kishore: It did look likely that the virus would spread beyond Asia in a more inter-connected world. Even so, the situation was expected to be largely under control by the middle of the year. This has been true in many places and globally, economic recovery did begin to take hold from the start of the third quarter. The difference, however, stems from two developments. First, the inability of some countries like the U.S., Brazil, Russia and India to still contain the initial wave of the pandemic and, second, recurring waves in some other places. In that sense, the virus has turned out to be far more infectious and resilient than was initially anticipated.
TheStreet: On that note, are you at all surprised that much of Asia — except for India — has largely come out ahead in the fight against Covid-19, while parts of Europe and the Americas have not yet?
Kishore: Given most of Asia’s past experience with SARS, it was not completely unexpected that the authorities would be better prepared to tackle Covid-19. For example, Hong Kong declared the virus outbreak an emergency as early as Jan. 25, and ramped up measures to limit the spread of the infection. The memories of the SARS epidemic also likely made Asian economies more willing to impose stricter lockdowns to contain the Covid outbreak. Finally, it helped that most of them entered the crisis with available policy space that they could use to cushion the downside impact of the pandemic on their economies.
TheStreet: Do you think this report shows that acting aggressively in the beginning really turned out to be the best investment in both health and the economy?
Kishore: I think that depends to a large degree on the extent of policy support offered by authorities. An aggressive lockdown, without adequate fiscal measures to lessen the economic shock, can result in quite substantial damage, as India’s case shows. It’s also important how the exit from the lockdown is managed. A rapid exit could dent much of the positive impact of the initial lockdown on the health front, if the pandemic was not showing signs of abating to begin with. Looking across Asia, Singapore appears to have got the steps largely right so far. While one could debate that it initially dragged its feet on a stringent lockdown, once cases started accelerating, it quickly proceeded with the “circuit breaker,” while simultaneously announcing several fiscal initiatives to support the economy. It has also adopted a cautious exit approach, given the global evidence on the pandemic recurring.
TheStreet: You note the flip in the outlook for Hong Kong vs. Singapore. Is that because of Covid-19 or the political unrest that coincidentally hit Hong Kong over the past 12 months or so?
Kishore: It is true that Hong Kong’s growth outlook is dragged down by the ongoing civil unrest. But that has been baked into our forecasts for a while now. The recent shift that I refer to in the scorecard is largely due to changes in the stringency and containment scores of these two economies. Admittedly, the Oxford stringency index has a mixed track record when it comes to accurately capturing the strictness of social distancing measures in different economies. But the outcomes for Hong Kong and Singapore appear to be in line with on-the-ground evidence. Resumption of activity has hit a roadblock in Hong Kong, following the third wave of Covid-19, which has led to the imposition of strict containment measures since July. However, Singapore’s economy is picking up the pace as it gradually exits the lockdown, with the pandemic largely contained.
TheStreet: What do you make of Japan? It has a new prime minister, was making progress in areas like tourism, but now has hefty travel restrictions, and is kind of an outlier in its Covid fight.
Kishore: Japan features in the middle of our recovery scorecard. Its growth outlook is hampered by structural vulnerabilities, such as a large share of auto exports in its trade basket and a weak containment score that basically reflects the renewed wave of infections in July to August. It does have a relatively strong policy score. But this does not fully capture the belated and slow pace of implementation of the announced fiscal packages, and that impairs their effectiveness. Altogether, this ties in with our forecast of 5.6% growth contraction in 2020. I do not expect the change at the helm to impact the short-term economic outcomes too much. Having served as chief cabinet secretary for nearly eight years in the Shinzo Abe administration, Prime Minister Yoshihide Suga is closely associated with the current economic programs and is unlikely to change them for the time being.
TheStreet: Do you see a new Asian leader coming out of this world tragedy in a year or so from now, or do you think we will emerge in a kind of status quo?
Kishore: Covid-19 has accelerated some trends that were already in place before its onset. A key one was the diversification of supply chains. With the risks of supply chain concentration in a few key economies being highlighted like never before, it’s not just the U.S. anymore that is vying for relocation of production lines from China. Whether this translates into more production returning to domestic markets or just being re-distributed to other parts of the world remains to be seen. Southeast Asia has definitely emerged as a strong contender and India is keen to make a mark, too. To me, this suggests that the world is looking to pivot to a multi-polar existence rather than seeking to put all its faith again in a single leader, new or otherwise.