China, Vietnam expected to have V-shaped recovery
Economic recovery depends on virus control says World Bank
MANILA – The World Bank said over a year since the onset of the COVID-19 pandemic, the developing economies of East Asia and the Pacific (EAP) continue to face what it described as “markedly uneven recovery.” This was the gist of the World Bank’s latest economic update for the region released today in Washington.
So far, only China and Vietnam are experiencing a V-shaped rebound where their output already surpassed pre-pandemic levels. Meanwhile, the other major economies remained on average of about five percent below pre-pandemic levels. Hit hardest are the Pacific Island countries as economic performance has hinged on the effectiveness of virus containment, the ability to take advantage of the revival of international trade and the capacity of governments to extend fiscal and monetary support.
According to the statement, poverty in the region stopped declining for the first time in decades. The pandemic prevented some 32 million people from the region to escape poverty. The World Bank set the poverty line at US$5.50/day).
“The economic shock cause by the COVID-19 pandemic has stalled poverty reduction and increased inequality,” said Victoria Kwakwa, World Bank Vice President for East Asia and the Pacific. She explained with countries beginning to rebound this year, governments will need to take urgent action to protect vulnerable populations and ensure a recovery which is “inclusive, green and resilient.”
In their latest economic update, World Bank noted inequality increased and driven by the pandemic and resulting shutdowns “as well as unequal access to social services and digital technologies.”
“In some countries, children in the poorest two-fifths of households were 20 percent less likely to be engages in learning than children of the top one-fifth. Women are suffering more violence than previously: 25 percent of respondents in Lao PDR and 83 percent in Indonesia said that domestic violence due to COVID-19,” the statement added.
The projected growth in the region to accelerate from an estimated 1.2 percent in 2020 to 7.5 percent in 2021 but will probably have a “three-speed recovery.”
China will grow by 8.1 percent from 2.3 percent in 2020 and Vietnam will have 6.6 percent from 2.9 in 2020, are expected to grow even more strongly in 2021. Other large economies, “more scarred by the crisis, will grow about 4.6 percent on the average,” which is slightly slower than pre-crisis growth.
Recovery Is projected to be protracted in tourism-dependent island economies.
The report estimates that the American stimulus program could add 1 percentage point on average to the growth of countries in the region in 2021 and advance recovery by out three months on average.
“Risks to the outlook come from slow implementation of COVID-19 vaccines, which could slow growth by as much as 1 percentage point in some countries,” the statement disclosed.
The same report calls for action to control the disease, support the economy, and pursue the greening of the economy.
“It warns that with current stocks and allocation of vaccines, industrial countries would achieve more than 80 percent population coverage by the end of 2021, while developing countries will achieve only about 55 percent coverage,” the report said. In most EAP countries, relief is less than earning losses, stimulus has not fully remedied deficient demand, while public investment is not a significant part of recovery efforts though public debt has increased on the average by 7 percent points of GDP. Efforts to “green” the economy are overtaken by “brown” activities in the stimulus packages across the region, on average only one-in-four recovery measures taken by countries across the region are considered “climate friendly.”
Aaditya Mattoo, chief economist for East Asia and the Pacific said there is a need for international cooperation to contain the disease, support the economy and green the recovery.
The same report underscored the need for international cooperation in the production of vaccines and allocation based on need, to help suppress COVID-19 as fiscal coordination will magnify the collected impact as some governments tend to “under-provide stimulus.”
The report entitled “Uneven Recovery” focused on vaccination, fiscal, and climate change politics follows two economic updates for the region in 2020 that considered six other policy dimensions of resilient recovery from the COVID-19 pandemic – particularly smart containment, smart schooling, stepped-up social protection, support for firms, balanced financial sector policies and trade reform. (Melo M. Acuña)