Last week was tough for the Asia-Pacific region. Many countries responded to stubbornly elevated daily infections by extending or tightening social distancing measures.
The highly contagious Delta variant is challenging policymakers and threatens our the expectation that economic recoveries will gather momentum in the second half of 2021
- The slow rate of vaccination is a thorn in the region’s economic recovery.
- The Delta variant of COVID-19 is sweeping the region, causing particular pain to Southeast Asia.
- The slow rate of vaccination is a thorn in the region’s economic recovery. As Asia’s average rate of full vaccination of its population is low, lockdowns and other restrictive social distancing measures are necessary to protect the vulnerable.
- The onus is on fiscal policy to do the heavy lifting; the appetite and ability for additional monetary support is low.
Southeast Asia hit badly
Southeast Asia has been hit badly. Daily infections for Indonesia, Thailand, Vietnam are at their worst, on a seven-day moving average. The Philippines and Malaysia are not far off their daily infection peaks reached in the second quarter of 2021.
Downward revisions to GDP forecasts have previously occurred for Indonesia, Philippines and Malaysia. Further markdowns are likely for the current quarter given economic recoveries are being paused and a stronger bounce back being pencilled in for the December quarter. Indonesia is at the worse end of the spectrum.
We already downwardly-revised our forecast for GDP in our July baseline from above 5% to 4.5% and the likelihood of further downward revisions is high, as the national lockdown saps…