The World Bank just released its “East Asia and Pacific Economic Update, April 2020: East Asia and Pacific in the Time of COVID-19” report, and it’s a sobering read. Developing economies in East Asia and the Pacific (EAP), recovering from trade tensions and struggling with a viral disease, now face the prospect of a global financial shock and recession. Growth in China is projected to decline to 2.3 percent in the baseline and 0.1 percent in the lower-case scenario in 2020, from 6.1 percent in 2019.
Growth in the rest of the developing EAP region is projected to slow to 1.3 percent in the baseline and to negative 2.8 in the lower-case scenario in 2020, from an estimated 4.7 percent in 2019. Containment of the pandemic would allow recovery, but the risk of durable financial stress is high even beyond 2020. Most vulnerable are countries that have poor disease control and prevention systems; that rely heavily on trade, tourism, and commodities; that are heavily indebted, and that rely on volatile financial flows.
More generally, to support both relief and recovery, the World Bank Group and the International Monetary Fund (IMF) are making available financing, policy advice, and technical assistance. The World Bank Group has already rolled out a $14 billion fast-track package to strengthen the COVID-19 response in developing countries and shorten the time to recovery. As countries need broader support, the World Bank Group is prepared to deploy up to $160 billion over 15 months to protect the poor and vulnerable, support businesses, and bolster economic recovery.
The last time the world faced a global emerging disease epidemic on the scale of the current COVID-19 pandemic with no access to vaccines was the 1918–19 H1N1 influenza pandemic. That pandemic is estimated to have killed 50 million people worldwide. In lethality, the COVID-19 virus resembles H1N1 influenza. The Imperial College COVID-19 Response Team in London used a micro-simulation model to predict different scenarios depending on the type of response in the United Kingdom and the United States. In the case of an unmitigated epidemic, they predict approximately 510,000 deaths in the United Kingdom and 2.2 million in the US, not accounting for the potential negative effects of health systems being overwhelmed on mortality.
The global spread of the virus has rattled financial markets around the world and is reverberating in the developing EAP economies. Developing EAP economies are vulnerable in different ways, for example, through elevated domestic debt (China, Vietnam, Malaysia), private sector debt (China, Malaysia, Thailand), external debt (Lao PDR, Mongolia, Malaysia, Papua New Guinea, Cambodia); or heavy reliance on short-term debt (Malaysia and Thailand).
Global GDP is expected to decline by 2.1 percent, while developing countries’ GDP is expected to decline by 2.5 percent and high-income countries by 1.9 percent Figure I.2.12 The biggest GDP losses under the global pandemic scenario are expected in EAP countries due to their relatively deep integration through trade and direct impact on tourism, e.g., Cambodia (3.2%), Singapore (2.1%), Hong Kong, SAR, China (2.3%), Thailand (3%), Vietnam (2.7%), and Malaysia (2.1%).
A global crisis requires a global response and there is a need for global collaboration not just on health, but also on trade, finance and macroeconomic policies. Fortunately, global institutions, are beginning to catalyze and coordinate global efforts, as well as to provide technical and financial support countries coping with health and economic consequences of the outbreak.
Source: The World Bank
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Anil started his career in journalism all the way back in 2003. After traversing the sphere of editorial, corporate communications and advertising, he has now come full circle and is back in the world of journalism. He believes in the power of the written word, and its ability to enthrall, delight and inform the reader.
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