The scale of the novel coronavirus (Covid-19) epidemic in South-East Asia is larger than official figures suggest, especially given the level of crossborder travel within the region prior to border closures. The region is particularly vulnerable to disruption from the disease, given weak healthcare systems, densely populated urban areas and low average income levels.
Like most public leaders around the world, those in South-East Asia face the difficult challenge of balancing epidemic control measures with economic growth. Although all governments in the region have introduced some form of containment measures, concern over the large informal sector has prevented countries like Indonesia and the Philippines from shutting down business activity completely.
Amid the pandemic it is unsurprising that The Economist Intelligence Unit has cut our 2020 economic growth forecasts substantially for all South-East Asian countries. Restrictions on the movement of people will lead to a demand-side shock to private consumption—the primary driver of economic growth in many of the region's economies—which will be exacerbated by weak consumer sentiment. The tourism industry, which the Thai economy is dependent on for growth and incomes, is not likely to recover for months after the resumption of economic activity. Across the region swathes of businesses, especially small and medium-sized enterprises, will go bankrupt, and even those that survive will put off investment plans. Foreign direct investment (FDI) will decline in each country as overseas companies focus on their home markets and shun riskier investments. Meanwhile, as formal unemployment rises, joblessness among informal workers will be higher – constraining the path to recovery.
Meanwhile, it is becoming clear that until a treatment or vaccine becomes available, which may be at end-2021 at the earliest, the coronavirus will remain in circulation, requiring social-distancing practice to stay in place and the intermittent tightening of containment measures.
Wealthier countries, such as Malaysia, Singapore and Thailand, have announced very large fiscal support packages, while developing economies, like Indonesia, remain reluctant to bankroll measures on such a scale. Meanwhile, Vietnam, which appears to have kept its outbreak under control so far, does not have the same impetus to carry out stimulus. The different responses are probably being influenced by the countries' fiscal positions and the maturity of their banking sectors.
Nonetheless, regardless of their size, government support packages are unlikely to slow the economic downturn significantly. Where then, are the opportunities for business in the region? How differently will the impact of the pandemic be felt across South-East Asia's economies, sectors and jobs markets? What political risks loom on the horizon, or has the crisis strengthened the strongman's authority?
Join us and our South-East Asia correspondents from The Economist newspaper, as we review the impact of Covid-19 on the region's economies, and discuss the risks and opportunities for business over the next two years.
Please note that this event is limited to senior-level executives and per invitation only. If you are not an existing member of The Economist Corporate Network, but would like to learn how you can attend our events, please send an email to email@example.com.