(extracted from View From Asia, Financial Times, London, 16 April 2020): https://www.fdiintelligence.com/article/77277
As Covid19 intensifies to a global pandemic from lockdown Asia to partial world lockdown, what is the domino effect and impact on Asia?
IMF has said the pandemic was already driving the global economy into recession. World Economic Forum said Covid19 has forced lockdowns across Asia over February and March, paralyzing economic activity across Asia and shutting down factories and manufacturing . Purchasing Managers’ Index (PMI) surveys across Asia show significant contraction to record lows since 2009.
Asian governments have drawn up monetary and fiscal stimulus measures which spend between 1% to 11% of GDP, but these mostly address corporate funding, banking systems and household cash support needs in the immediate term.
What will likely happen to Asia if Covid19 persists till December 2020 or longer? Devastating.
Governments are very likely to increase their massive spending and run huge budget deficits to avoid or reduce bankruptcies and debt defaults. Military will likely be called in to assist in law enforcement and even essential services as the pandemic spreads across hospitals, police and fire stations, airports, army bases, prisons, and public transport systems. Public health systems will be strained even further to handle increasing numbers of infected people.
Companies will continue to suffer from supply chain disruptions (raw material and component shortages), halt investment, retrench staff and place more on Leave of Absence and comply with orders to allow near-100% staff telecommuting. Productivity will suffer as mostly online activities are relied on. Airlines and hospitality will experience near zero tourism. Retailers will be badly affected as most will be ordered to close except for food and pharmacy stores. For other companies, only essential services are allowed to operate. Smaller companies and startups that lack investor funding or government support will die and become bankrupt before the pandemic is over.
Consumers continue to face worsening retrenchment and debts, stricter social distancing measures, food hoarding and closing of schools and majority of shops. Current unemployment rate of 4.1% will more than double. Public gatherings of big groups is banned. Low-income families will continue to receive direct cash transfers, food assistance, employment aid (even to farmers), and health insurance. Children will stay at home for online learning. Informal sector of freelancers and gig workers lose the most as they rely on cash-based sectors for work.
By the time the pandemic is over, it will take years for the gradual Asia recovery. Until then, the pandemic rages on, destroying previous strategic plans and budgets, companies and lives meanwhile.
