ASEAN growth seen rebounding after strictly enforced lockdowns

SOUTHEAST ASIA’S stunted growth momentum due to the severity of its lockdowns will be temporary because of its critical role in global supply chains, which will allow it to eventually close the gap with regions that remained relatively open like Latin America, Moody’s Analytics said.

Moody’s Analytics noted that strict lockdowns in Southeast Asia have hurt key growth drivers in the region such as consumer spending and exports.

“Pandemic restrictions proved largely successful in preventing mass outbreaks in export-oriented manufacturing industries, a key motor of growth for Southeast Asian economies,” Moody’s Analytics Economist Jesse Rogers said in a note Tuesday.  

“However, with restrictions on the service sector severing the traditional link between manufacturing and gains in the broader economy, trade will provide only limited support,” it added.

Mr. Rogers said Latin American countries saw a smaller hit to consumer spending, retail sales and industrial production, as most leaders pushed “to keep economies running even at the expense of adverse health outcomes.”

“Sweeping restrictions on social and business activity caused output to decline in Malaysia, the Philippines and Vietnam on a seasonally adjusted basis in the second quarter,” Mr. Rogers said.

“Thailand and Indonesia fared better, but Delta’s surge in these countries did not begin until late June, and we expect the hit from pandemic restrictions to show forcefully when July data begin to trickle in later this month,” he added.

Asian Institute of Management Economist John Paolo R. Rivera said the ASEAN strategy is more aligned with the region’s healthcare capacity.

“While this is not economically sustainable, lockdowns allow governments to buy time in creating innovative ways to manage the pandemic whilst having manageable economic repercussions,” Mr. Rivera said in a text message.

Metro Manila and some provinces reverted to the strictest lockdown settings for two weeks in March and April due to an infection surge.

Restrictions have since been eased. However, Metro Manila and some provinces were again back on lockdown from Aug. 6 to 20 to contain the Delta variant of the coronavirus.

Moody’s Analytics downgraded its growth outlook for the Philippines to 4% in August, from the previous estimate of 4.9%, citing the new lockdowns.

Gross domestic product (GDP) rose 11.8% in the second quarter, ending a 15-month recession. However, GDP dropped 1.3% quarter on quarter, reflecting the impact of the lockdown in March and April.

COVID-19 cases rose by 12,067 Tuesday, bringing total active infections to 127,703, according to the Department of Health.

Another factor that dampened Southeast Asian growth in comparison to Latin America is the late start of vaccination campaigns in ASEAN, Moody’s Analytics said.

“In most of the region, less than one-fifth of the population has received vaccine first doses — means that pandemic waves will reverberate for some time,” Mr. Rogers said. — Luz Wendy T. Noble

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