The rebound in economic activity in the second half of 2020 and the continuation of fiscal and monetary support by Asia-Pacific Economic Cooperation (APEC) member economies brought about a slight improvement to the region’s economic growth, the APEC Policy Support Unit (PSU) found in a new updated report.
The February 2021 update of the APEC Regional Trends Analysis; Uneven Recovery, Unequal Impact’ policy brief shares that economic growth in APEC is now estimated to decline by two per cent in 2020, up from its initial forecast of a 2.5 per cent contraction in November, bringing the total output loss to USD1.5 trillion, a press release stated.
The new report also projects economic growth for the region at 5.7 per cent in 2021 and 4.1 per cent in 2022.
APEC PSU Director Dr Denis Hew said, “Governments around the region continue to mitigate the economic fallout of the COVID-19 pandemic with a series of stimulus measures, including liquidity support and loan moratoriums extended to businesses as well as cash handouts and wide-ranging subsidies to households. These measures stimulate domestic consumption as economies reopen gradually.”
The report noted that despite the slight uptick in 2020’s economic growth and a relatively optimistic outlook for 2021 and 2022, growth will be uneven across APEC economies, with the speed and strength of the recovery largely determined by the effective management of the pandemic and successful vaccination programmes.
“Different levels of access and schedules as to when at least 60-70 per cent of the population will be vaccinated will eventually affect the timing of economic and border re-opening, translating into diverging speeds of economic recovery across the region,” APEC Policy Support Unit Researcher, who updated the report, Rhea C Hernando said.
The report added that several APEC economies could achieve widespread vaccination as early as the latter part of this year, with 10 other members by mid-2022.
“There is an urgent need for closer cooperation between policymakers and the private sector to educate the public about the efficacy of each vaccine, in order to combat misinformation and encourage higher vaccine uptake,” Hernando said.
Challenges remain for APEC to address the unequal impact of the pandemic on various segments of society, especially the poor, women and the youth.
In terms of trade, the region recorded a better performance in the third quarter of 2020, with the value of merchandise exports and imports declining at a lower rate of 2.4 per cent and 5.7 per cent from as much as 16 to 17 per cent in the previous quarter. This improved performance is in line with global trade, supported by a 50 per cent growth in trade of medical supplies since April 2020.
Commercial services continued to tumble, largely resulting from major losses in the transport and travel sectors. For the period January to September 2020, commercial services plunged by a cumulative 22.9 per cent for exports and 24.5 per cent for imports.
Nevertheless, the rise of remote work and work from home initiatives also increased demand for home office and communication equipment, giving trade in this sector as well as apparel and textile a boost.
The policy brief provides some imperatives for economic recovery, stating, “A year into a pandemic that shows no sign of abating, economies continue to grapple between extending movement restrictions at the risk of long-term economic scarring, or re-opening the economy at the risk of a resurgence in infections.”
It highlights that the first priority is the effective containment of the virus. “Public health efforts at contact tracing, testing, isolating and treating patients need to be sustained; while wearing of masks and social distancing need to continue as the pandemic rages. Vaccines could eventually end the pandemic, but this requires universal access.”
“Regional fora, like APEC could play an important role in ensuring a free and rapid flow of vaccines and therapeutics across borders. APEC could also launch an intensified information campaign to boost vaccine uptake and combat misinformation. Moreover, sharing of information on effective vaccine rollout systems could help economies address logistical and distribution issues.”
Secondly, it underscores the importance of economies continuing employing fiscal and monetary stimulus support measures to maintain livelihoods.
“Even as liquidity assistance to businesses and cash handouts to households need to continue to be provided in the immediate term, economies also need to take advantage of digital opportunities. The pandemic has highlighted the role of innovation and necessitated the move towards digitalisation. When fiscal space allows, economies can invest in digital infrastructure, green jobs and new technologies, while also ensuring the upskilling and reskilling of the workforce.”
The policy brief also notes that it is also imperative for regional cooperation mechanisms to take a more pro-active role in building back better.
“APEC could develop a system that facilitates timely exchange of information and expertise related to the pandemic. A regional understanding on effective mass testing, quarantining, travel corridors, and protocols could pave the way towards gradual border re-opening.
“Strengthening trust and coordination among member-economies to boost trade facilitation and resilience of supply chains, especially amid the crucial phase of vaccine acquisition and distribution remains important. And there has never been a more urgent time than now to advance structural reforms that encourage innovation and digitalisation, facilitate equitable access to healthcare as well as education and skills training, and promote women’s economic empowerment.”
The report added that for APEC to move towards sustainable growth, resilient and inclusive, it needs to collectively take meaningful steps to make sure that no one is left behind. “Perhaps New Zealand’s theme for APEC 2021 best captures today’s imperative: ‘Join. Work. Grow. Together’.”