Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Coming Impact of Coronavirus Economic Contraction in ASEAN Countries

Economics / Coronavirus Depression Apr 22, 2020 - 06:26 PM GMT

By: Dan_Steinbock

Economics

After the COVID-19 earthquake and a historical contraction, China is rebounding, whereas advanced economies face a depression-like plunge. The consequent tsunami is about to hit Southeast Asia.

As the total number of confirmed cases may exceed 3 million and deaths will surpass 200,000 in a matter of days, the U.S. and Europe account for more than 80% % of both. What was an epidemic in China at the turn of January and February grew into a pandemic in the 1st quarter, thanks to the belated mobilizations in Europe and the US.

As I predicted in a mid-March briefing (TMT, March 23), what is about to follow is the great coronavirus contraction. Its economic impact will be comparable to the 1930s Great Depression. With more data available today, we have a better idea what’s about to happen, despite extraordinary uncertainty.


No country in Southeast Asia will be immune to the impact.

COVID-19 impact on Southeast Asia            

In the coming months, emerging and developing economies will seek to cope with the coming economic tsunami. With weaker healthcare systems, the poorest economies, particularly oil and commodity exporters, will take the heaviest hit.

In January, the confirmed cases in the emerging ASEAN economies varied from presumably none in Indonesia to more than 30 in Thailand.

After the 1st quarter, most saw the cases increase by 10, 100, even 1,000 times. And by mid-April, the largest case counts are in the Philippines, Indonesia and Malaysia (5,100-5,700), Thailand and Vietnam (Figure 1).

Figure 1       Cumulative confirmed cases in ASEAN-5

Source: WHO data, Difference Group

Size matters. The bigger the country, the greater the potential for broad COVID-19 spread. However, aggregate figures must also be seen relative to the population size (total cases/1m pop). In this view, the COVID-19 impact has been hardest in Malaysia (164), followed by the Philippines, Thailand (40-60), Indonesia and Vietnam (3-23).

To put these numbers in context, let’s recall that in Singapore (1,024) they are almost 10-fold relative to Malaysia; and in the US, twice as high as in Singapore. On the other hand, wealthier economies, such as the US and Singapore, benefit from more advanced healthcare systems.

Another caveat involves the term “confirmed” cases. The more countries test, the accurately the cases will reflect the actual impact. In this view, Malaysia, Vietnam and Thailand have used significantly more tests than the Philippines and Indonesia. Although recently the Philippine test capacity has been improving significantly.

In part, the difference is a matter of population size. The bigger the country (Indonesia, Philippines), the harder it is to test broadly. In part, it is due to the level of economic development. Upper-middle income countries (Malaysia, Thailand) tend to test more than lower-middle-income nations. Yet there are exceptions (Vietnam).

Economic impact on Southeast Asia           

As the outbreak has spread, the disruption of supply chains and temporary plant shutdowns, coupled with a sudden full stop in global demand, weigh heavily on those ASEAN economies that still hope to rely mainly on export-led growth.

As Vietnam, as well as Singapore and Malaysia, have discovered, two years of trade wars and a few months of a global pandemic can undermine a decade of export recovery. In turn, those countries that depend on both tourism and exports (Vietnam, Singapore, Malaysia) must now cope with longer-term economic malaise.

In emerging economies, healthcare systems lack adequate capacity against the pandemic. If these countries had not implemented quarantines and lockdowns, they would suffer disproportionately from new virus clusters and new virus waves in the future. If they implement quarantines and lockdowns that are not adequately enforced, the net effect will be the same. And when these countries successfully execute effective quarantines, these will severely penalize their economies as domestic consumption and the businesses will take a severe hit.

So, the new baseline scenario is that Indonesia, Philippines and Vietnam will all suffer a severe growth contraction in the 2nd quarter that will cast a long shadow over the year. In Indonesia, the contraction will mean a plunge from 5.0% in 2019 to 0.5% in 2020; in the Philippines, the comparable figures are currently seen as 5.9% and 0.6%, respectively.

Better positioned initially, Vietnam’s GDP growth will fall from 7.0% to 2.7%, if it can minimize the virus impact at home. Philippines could have been better positioned against the crisis, but that advantage was largely lost with the spring 2019 budget debacle (compare my column on TMT, Jan 28, 2019).

Assuming a relatively strong rebound scenario, ASEAN economies could have a V-shaped rebound by 2021, when Indonesia and Philippines could perform better than Vietnam (Figure 2).

Figure 2       Expected coronavirus contraction in ASEAN-5

Source: IMF data, Difference Group

However, he current baseline scenario may still prove too optimistic. The challenges in the West could linger over the 3rd quarter, while the devastation in emerging and developing economies could spill over the latter half of the year, with adverse feedback effects. A new virus wave could follow in the fall. Imported infections could accelerate toward fall 2020 and spring 2021.

And as the heavily-indebted advanced economies are now taking record-volumes of new debt to support their economies, they could face new debt crises, which would spill over to poorer countries, through trade, investment, and finance. The resulting financial tightening might undermine current progress in many countries – and so on.

Should any of these scenarios materialize, the kind of strong and broad rebound that many international observers currently expect (or rather, hope) would deteriorate into a weaker and slower, longer-term process.

We can all hope for the best, but it would be very naïve not to prepare for worse.

Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/  

© 2020 Copyright Dan Steinbock - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dan Steinbock Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in