A new updated report from the APEC Policy Support Unit finds that the COVID-19 pandemic is causing a deeper contraction to the region’s economy. The Asia-Pacific Economic Cooperation (APEC) region’s economic growth is now expected to decline by 3.7 per cent in 2020, down from its initial forecast of a 2.7 per cent contraction in April, bringing the total output loss to a staggering USD2.9 trillion.
Member economies of the APEC, include Australia, Brunei, Canada, Chile, mainland China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, South Korea, Taiwan, Thailand, the United States and Vietnam.
These new projections are in line with the revisions by the International Monetary Fund (IMF) in its recently updated World Economic Outlook. Global growth is projected to fall to -4.9 per cent, compared to a decline of -3 per cent estimated earlier by the IMF, the report stated.
“The protracted duration of the pandemic has caused a crisis worse than anticipated impacts on the global economy, with some economies recently reporting a second wave of infections,” said Director of the APEC Policy Support Unit Dr Denis Hew.
Dr Hew added that economic recovery is in the horizon but it is “highly dependent on the availability of vaccines and treatments as well as the effectiveness of economic policies that are being implemented by economies to address the pandemic”.
The updated report projects an economic recovery for the region of 5.7 per cent in 2021, compared to the earlier estimate of 6.3 per cent. This economic rebound hinges on whether the pandemic can be contained over the second half of this year.
The APEC region’s growth declined by 2.2 per cent in the first quarter of this year due to travel restrictions and widespread lockdown measures that depressed domestic consumption, trade and investment activities.
Merchandise trade recorded a bigger contraction in the first quarter from the combined impact of trade tensions and supply chain disruptions. “In overall terms, merchandise trade in APEC has significantly decreased in both value and volume this year,” explained APEC Policy Unit’s researcher Rhea C Hernando who wrote the updated report. “The temporary restrictions imposed on food and medical supplies weakened trade even further in the first quarter of the year.”
The region’s value of trade in goods dropped by 5.8 per cent for exports and 4.1 per cent
Foreign direct investment shares similar sentiment with inflows to the APEC region going down by 3.1 per cent, while greenfield investments dropped sharply by 20.4 per cent in 2019.
In the midst of uncertainties, the report recommends APEC economies to take decisive actions including intensifying efforts towards containment measures to avoid further waves of the pandemic, while at the same time maintaining fiscal and monetary stimulus measures to help alleviate the risk of people falling into poverty and businesses going bankrupt.
The report also urged member economies to invest in digital technology, including building or boosting technological infrastructure, equipping workers with digital skills and modernising business and governance processes. This investment could contribute to making economies more innovative and dynamic while expanding access and opportunities to everyone.