High-frequency indicators suggest that the surge in cases has knocked economic activity. Daily mobility figures from Google suggest that people in Indonesia and Vietnam are spending more time at home than they did during the outbreaks of last summer. The most reliable indication of the scale of the economic impact may come from Malaysia, which was hit by a fresh outbreak a little before its neighbours.
On July 20th the Asian Development Bank pared back its growth forecasts for South-East Asia. It now expects an expansion of 4% this year, compared with an earlier forecast of 4.4%. That may not sound so bad, given the scale of the public-health catastrophe. But it means that the region is no longer expected to return to its pre-pandemic level of output by the end of 2021. Some countries, moreover, will suffer much more than others. And they have fewer tools available to soften the blow.
By contrast, Thailand has suffered without tourists, whose spending accounts for around a fifth of the country’sexpects growth of only 2% this year. Faced with this dire economic picture, Phuket has reopened to some vaccinated foreign tourists, a move that Prayut Chan-o-cha, the Thai prime minister, described bluntly last month as a “calculated risk”.
Yet reopening at home alone cannot restore economic normality. The recent outbreaks have also dashed any remaining hope of the resumption of tourism from China. Chinese visitors made up between a quarter and a third of tourists in Cambodia, Myanmar, Thailand and Vietnam before the pandemic. Beijing’s reluctance to open its borders, which could persist well into next year or beyond, adds to the economic squeeze.
Meanwhile, central banks in the region are less able to stoke domestic demand and cushion the impact of the outbreaks than they were when the pandemic began. Last year interest rates were slashed to historical lows in most emerging markets. Central banks in Indonesia and the Philippines even joined those in rich countries in pursuing modest bond-buying schemes. Nothing similar seems likely this time. Currencies across the region have stumbled, with selloffs accelerating in the past month.
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