Economic growth in Apec ‘better than expected, but uncertainty remains’
New economic data from across the Asia Pacific Economic Cooperation (Apec) region shows a softer economic contraction of 1.9 per cent in 2020, with continued fiscal measures leading to a rise in government consumption and improved investment and household consumption, the Apec Policy Support Unit said in a press release from Singapore on Thursday.
According to the latest Apec Regional Trends Analysis, household consumption, the bloc’s main driver of growth improved to -3.9 per cent in the second half of 2020 on a year-on-year basis, compared to -7.0 per cent in the first half of last year. Investment followed the same trend, recording a smaller decline of -6.1 per cent in the second half of 2020 compared to -10.5 per cent in the first half.
The report notes that governments across the region have learned effective ways to manage the pandemic and people have learned to adapt to new ways of earning a living. This has resulted in a gradual reopening and resumption of economic activities, which boosted consumption.
The region’s economy is estimated to grow by 6.3 per cent in 2021, with an expected strong increase in domestic and global activity as pent-up demand is unleashed. The development and production of multiple vaccines also boost optimism for a more durable economic recovery.
“The worst fears from last year did not come to pass as we saw a stronger economic rebound in the second half of last year, and this will likely continue throughout 2021,” said Apec Policy Support Unit director Denis Hew.
“However, the region continues to face significant uncertainties, largely linked to how the pandemic is evolving, while job losses due to the pandemic and expectations of higher inflation this year could suppress consumer spending,” he said.
The weakness in investments, which is projected to extend to 2021, could also affect growth, according to the report. “The start-stop economic reopening scenario as economies navigate through a resurgence of infections could hold back investment activity,” Hew added.
The report warns that the uneven recovery in the region is largely related to differences in vaccine access and availability.
The majority of Apec member economies could achieve widespread immunisation by mid-2022 or after, with some anticipated to do so earlier, by the end of 2021.
The disproportionate impact of the pandemic is also highlighted in the report. The pandemic affected everyone everywhere.
Meanwhile, most micro, small and medium enterprises lack the capital and technological expertise to make their shift to online, translating into losses and closures and adding to rising livelihood fragility and poverty.
“People with insufficient digital skills and equipment or those living in areas where access to the internet is unreliable or expensive are denied the chance to reconnect, unable to continue their work and study,” noted Rhea C Hernando, a macroeconomist with Apec’s Policy Support Unit.
Unequal access to vaccines also aggravated the divergence in speed and strength of economic recovery in the region. Lower-income economies that rely largely on the Covid-19 Vaccines Global Access (Covax) facility for their supply of vaccines are in for a longer battle, making the effort to economic recovery very fragile amid a higher risk of virus resurgence.
“The pandemic has exposed the underlying gaps and inequality that have posed significant challenges to policymakers and societies,” Hernando said.
“We need to ensure that no one is left behind in our recovery journey by working together to contain the pandemic, implement structural reforms to boost human capital development and protect the environment,” she added.
View the latest APEC Regional Trends Analysis, May 2021