Post-pandemic recovery of the ASEAN economies
- The study has been authored by Ananya Raj Kakoti, an associate with Indian-Political Action Committee (I-PAC) and a scholar of international relations, and Gunwant Singh, a scholar of international relations from Jawaharlal Nehru University.
The Covid-19 pandemic has devastated the global economy in ways that it will be a long journey to recover to the pre-covid levels. The Association of Southeast Asian Nations (ASEAN) economies are no different. Early 2021 saw hints of recovery, however, the recurring waves of new Covid variants slowed down the pace in the third quarter of 2021. With a gradual decrease in the number of cases, the Southeast Asian (SEA) region is once again entering the phase of recovery in sync with the global economy.
In its latest economic outlook document for the region, the Asian Development Bank forecasted a 5.1% rise in Gross Domestic Product (GDP) for the region this year. This estimate is 3% more than the last year’s estimate when businesses were closed due to restrictions imposed for Covid-19. The recovery is a result of the coordinated actions taken by the ASEAN member countries. One such response was the Hanoi Plan of Action on strengthening ASEAN economic cooperation and supply chain connectivity. Under this plan, member-nations came together to streamline the flow of essential goods and improve the resilience of the supply chains in the region.
With the manufacturing sector coming back on track, exports are rising exponentially in some of the largest economies of the region. Malaysia saw a jump in exports by 30% annually as of November 2021. This rise is primarily due to electrical and electronic products which made up 40% of the total exports along with petroleum products and chemicals. Exports in Singapore also rose by 40% which is the largest gain in the last ten years. This increase is mainly driven by electronic products, pharmaceuticals, petrochemical, and specialised machinery. This return to normal economic activity is enabled by growing vaccination rates and a decline in hospitalisation in many countries.
Another sector that was severely affected due to Covid-19 induced slump was real estate. Among the economies of the region, Singapore is expected to recover much faster than its neighbours. Even though the pandemic, Singapore’s property market has remained resilient and has seen a 13% rise on average for the last two years. Vietnam’s property market is also expected to perform better than most of the other ASEAN economies. The residential market in Vietnam is attracting foreign investors as well. Along with this, its logistics and industrial property market have also been performing well. However, the picture is not so good for other ASEAN economies. Malaysia, Thailand, and the Philippines will not be recovering as swiftly as the above-mentioned peers. Residential building prices in Penang, Manila, and Kuala Lumpur, are still below pre-pandemic levels by 3-5%
The ASEAN-led Regional Comprehensive Economic Partnership (RCEP) Agreement which came into force in January 2022 will help in strengthening regional economic integration and will provide access to a larger market which will further help in economic growth, thus, aiding the post-pandemic recovery of the ASEAN economies. The region's push for digital transformation and its investment in digital infrastructure, cyber security, artificial intelligence, smart manufacturing, and cloud computing will go a long way in aiding the post-pandemic economic recovery. Under ASEAN’s Comprehensive Recovery Framework (ACRF), digital connectivity was identified as a priority.
The plateauing of Covid cases and the increase in the number of vaccinations have made it possible to resume economic activities in various sectors. However, the economic recovery is not uniform across the region as the major economies such as Singapore and Vietnam are recovering faster than their peers, while economies of Malaysia, Indonesia, Philippines, Thailand, and so on, are recovering at a relatively much slower rate. Tourism, being one of the most significant sectors in the ASEAN economy, has suffered immensely due to Covid. Even in 2022, the tourism industry is recovering at a sluggish pace, as the regional borders remain strictly monitored. There has also been a lack of cooperation and coordination across the region when it comes to the reopening efforts. For a sustained economic recovery, it is important that there is growth across sectors and no sector is left behind.
(The study has been authored by Ananya Raj Kakoti, an associate with Indian-Political Action Committee (I-PAC) and a scholar of international relations, and Gunwant Singh, a scholar of international relations from Jawaharlal Nehru University.)