The “Economic Outlook for Southeast Asia, China and India 2021: Reallocating Resources for Digitalisation” was released on Thursday.
The report said real GDP in Emerging Asian countries, namely Asean, China and India, is projected to drop by 1.7 per cent on average in 2020 before rebounding by 7.4 per cent in 2021 from a low base.
In Asean, average real GDP is projected to contract by 3.4 per cent in 2020 and grow by 5.1 per cent 2021, the report said.
The economy fallout in 202 is particularly pronounced in India (minus-9.9 per cent) and the Philippines (minus-9 per cent). At the other extreme, Vietnam will post the strongest output growth rate in 2020, forecast at 2.6 per cent.
The anticipated near-term rebound stems from improved financial conditions as well as monetary and fiscal policy measures put in place by governments. Yet several factors are expected to restrain demand and investment. Labour-market conditions will remain weak, while contribution of the external sector to recovery is jeopardised by an uncertain global economic situation. Public and private debt levels are also expected to rise. Moreover, if the quality of assets in the banking sector deteriorates, banks may not be able to provide sufficient support to the recovery. Finally, inflationary pressures should remain low due to the ongoing slack in the economy.
Each country's pandemic management strategies and their ability to maintain policy support will shape the 2021 recovery. Countries with superior pandemic management, including the distribution of Covid-19 vaccines, will fare better. When concerns about the virus recede, continued policy support to households and businesses will facilitate a faster rebound. With narrowing monetary and fiscal room of manoeuvre, policy makers in Emerging Asia will need to devote their attention to improving monetary policy transmission and increasing fiscal policy effectiveness.
The pandemic has accelerated the Fourth Industrial Revolution. Industry 4.0 technologies have allowed firms to stay responsive to market needs. Several countries in Emerging Asia have taken decisive steps to support digitalisation during the pandemic, most commonly by providing incentives to encourage e-commerce and the digitalisation of operations and trade channels. Varying levels of readiness and differing economic structures influence countries' capacities to adopt Industry 4.0 technologies. The most frequently cited bottlenecks include lack of adequate infrastructure and awareness, as well as financial limitations, notably for smaller firms. Greater co-operation is necessary to respond to increasingly sophisticated cyber threats and to strengthen cyber resilience in Emerging Asia.
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Published : February 04, 2021
By : The Nation