Economic recovery in ASEAN expected to be strong this year, but some risks lie ahead
Economic recovery in ASEAN is expected to be strong this year, bolstered by pandemic fatigue and countries shifting its strategies from grappling with Covid-19 to living with it.
But there are some uncertainties about whether governments will re-impose restrictions and growth will be collective, given that some economies are more badly impacted than others by the pandemic.
Mr Joseph Incalcaterra, chief economist for Asean at HSBC, said last year, some countries were not prepared for the Delta wave. “Policymakers are now more realistic and they understand that Covid-19 is not going away. Countries that were sticking to a zero-Covid-19 policy last year have abandoned those,” he said, adding that the commitment to live with Covid-19 will allow Asean countries to be more flexible with their policy actions. “By and large, it is very clear that we are not going to see the same lockdowns that we saw, I don’t think there is a political appetite nor economic capacity to have that again.”
Mr Andrew Naylor, the regional chief executive of Asia Pacific (excluding China) at the World Gold Council, said how governments react to an emergence of a new variant is an uncertainty that may hamper growth. He said: “The key is whether there will be an emergence of a new variant that perhaps escapes the vaccine…I think that is the main major immediate headwind that I see.”
Dr Marty Natalegawa, former Indonesian foreign minister, also said growth may not be equal across all countries in Asean as the pandemic has had varied effects on different segments of societies.
The pandemic had a disproportionate impact on lower-income and emerging economies, as these countries tend to have less resources to defend against external shocks and support their economy.
Countries also have different degree of exposure to external factors around them. For example, Singapore would be far more integrated and exposed to international development than Indonesia, Dr Natalegawa said.
How well Asean can recover also depends on how well it can ride on global trends, such as the focus on environmental, social and governance, the panellists said.
Mr Incalcaterra said producers, especially companies in the West, will be looking at the carbon footprint of the country and how electricity is being derived before choosing to make an investment. He said: “If you are producing components of electric vehicles’ batteries, but those components are being made with (coal-fired) electricity, then that makes it very difficult to sell to investors.”