The ASEAN Secretariat has published its policy brief highlighting the economic impact of COVID-19 on ASEAN recently.
It stated that COVID-19 has a negative impact on ASEAN’s economy and that of the rest of the world in 2020. Key sectors have been affected, particularly travel and tourism, and retail and other services sectors; business operations disrupting supply chains, employment and livelihood; while consumer confidence has declined.
The COVID-19 outbreak has diminished prospects of an economic recovery from a broad global slowdown last year. While initial pronouncements estimated a brief and limited impact on the global economy, the exponential spread of the outbreak to other regions including Europe, the United States (US), and also ASEAN, set off the tapering of growth prospects.
As the virus spreads rapidly in China, most ASEAN member states restricted travel from/to China, which was then expanded to other affected countries such as Japan and Korea, by cancelling flight connections and tightening or even closing border crossings.
The immediate and direct impact was thus on travel and tourism. These East Asian economies were among the largest sources of tourists to ASEAN, and as travel restrictions further expanded they led to mass cancellation of bookings within the tourism industry, affecting businesses and workers.
Early cases in the ASEAN member states surfaced, further affecting tourism in the region as fear of contagion turned away tourists.
At the start of the COVID-19 outbreak, many countries did not anticipate the subsequent aftermath, and underestimated the outcome. The International Monetary Fund (IMF) initially stated that the impact would be limited, likely around 0.1 percentage point off their 3.3 per cent 2020 growth forecast for the global economy. More than a month after the initial statement, the IMF announced deep cuts in its growth forecasts for 2020.
The Asian Development Bank (ADB), through the growth projections in its latest Development Outlook report, gave an indication of the magnitude of the impact, evident in the difference between the new numbers and the forecasts made last year prior to the outbreak.
ADB reduced its forecast for Developing Asia by 3.0 percentage points to 2.2 per cent, and for ASEAN by 3.7 percentage points to 1.0 per cent. ADB said Brunei Darussalam GDP growth is forecast to be 2.0 per cent this year and 3.0 per cent next year.
Accordingly, initial stimulus measures rolled out by the ASEAN member states targetted those in the tourism and allied industries. Affected hotels, restaurants, airlines, and also small businesses, were granted tax breaks and/or emergency loans; workers were provided subsidies/cash assistance.
Additional mitigating measures were also implemented in varying degrees – social distancing; temporary closure of schools, offices, and non-essential businesses; lockdowns; and quarantines have been imposed.
The economic impact likewise intensified as the stoppage in production, disruptions in business operations, and widespread restrictions on the movement of people resulted in losses for businesses and loss of livelihood and income for workers.
In terms of policy response to the pandemic, governments and central banks around the world have scrambled to ease monetary policies to support the health sector and economic activity and assemble stimulus packages to sustain businesses and individuals during lockdown or movement restrictions.
Within the region, the ASEAN member states have introduced various economic stimulus packages since February, to mitigate the effects of the COVID-19 outbreak. According to the World Travel and Tourism Council figures in 2018, travel and tourism made 6.7 per cent of the country’s GDP contributing some USD0.9 billion, generating some 17,000 jobs or about 8.1 per cent of total employment.
Some ASEAN member states have introduced distinct measures targetting key sectors of society. For example, Brunei measures include a six-month deferment on the Employees Trust Fund (TAP) and the Supplemental Contributory Pension (SCP) contributions for private sector employees earning BND1,500 and below in all sectors of the micro, small medium enterprise (MSME) category with employees fewer than 100.
Contributions by companies will be paid in advance by the government to ensure that the annual dividend payments to employees in the private sector will not be affected. Companies authorised to postpone TAP and SCP contributions are required to repay the government within a year after the expiration of the six months.