New Delhi: India and the Philippines will be the two worst hit economies in Asia in the medium term as the GDP of the region is expected to be down by $700 billion or 2.9% by 2025 in comparison with the pre-pandemic estimates, said a report by UK based think tank Oxford Economics. The impact of the Covid-19 on the 13 countries analysed by the think tank will vary hugely as Taiwan, Hong Kong and New Zealand’s economies will be at a higher level in 2025 than the pre-pandemic estimate. On the other hand, economies of India, the Philippines and Indonesia will suffer a sizeable permanent loss in the GDP growth.
Sian Fenner, Lead Asia Economist of Oxford Economics, said following a record decline in GDP in 2020, there will be a strong recovery of more than 6% in Asia-Pacific region over the next two years. Nonetheless, Fenner said, the permanent loss in output from the pandemic will be sizable as the region’s GDP will be down by nearly 3% compared to the think tank’s pre-pandemic forecast but the extent of economic scarring or permanent loss to the GDP will vary hugely across the region.
“We forecast Taiwan GDP to be 7.6% higher than before. In contrast, India and the Philippines are the main losers, with GDP levels estimated to be more than 8% lower,” Fenner said in her report. The think tank also explained the regions behind disparity in GDP growth trends among the major Asian economies analysed by it as Taiwan and Vietnam will benefit from the increasing electronics exports, particularly from the high demand of semi-conductors that will lead to higher investment and productivity in these countries.
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In contrast, India and the Philippines are set to experience particularly large losses given the sharp falls in investment and higher unemployment rates. The think tank prepared an economic scarring scorecard to assess the impact of tje Covid-19 pandemic on the GDPs of different countries in the region and analysed 16 cyclical and structural indicators and arranged them into five categories - decline in activity in the crisis year, recovery of potential GDP drivers, health-related scarring, structure of economy, and policy offsets.
“Taking into account regional trend growth, we consider how many years of trend growth has been lost due to the pandemic. This reveals Taiwan’s outperformance and lays bare India and the Philippines’ deep and persistent losses, with most of the region facing significant hurdles to return to pre-Covid trend growth,” Fenner wrote in the report.
Her analysis showed that the countries that were able to contain the virus quickly in the first year itself such as Taiwan, China, Vietnam, Singapore were quick to bounce back to higher GDP growth. “Indeed, the successful containment of the Covid-19 outbreak last year saw a swift normalisation in activity in Taiwan, Vietnam, China, and New Zealand, with GDP returning to pre-Covid-19 (Q4 2019) levels by Q3 2020,” she wrote in the report.
Failure to contain Covid hit economy
On the other hand, according to the report, countries that failed to contain the virus and also announced a smaller fiscal stimulus, suffered badly due to the Covid-19 global pandemic. “Ranked at the bottom of our scorecard are India, the Philippines, and Indonesia. All three have struggled to contain outbreaks since the pandemic took hold. At the same time, the fiscal response has been meagre in both India and the Philippines, given the stringency of their lockdowns,” said the report.
In India, the government last year announced a Rs 20 lakh crore stimulus package known as Atma Nirbhar Bharat (a self-reliant India). According to the government, the stimulus accounts for more than 10% of the country’s GDP but some economists said the actual fiscal spending as a percentage of the GDP was lower at 1.2% to 2.3% of the GDP. The Oxford Economics’ report also pegged the value of India’s fiscal response at little over 1% of the country’s GDP.
The report said while the investment was low and unemployment was high in the worst hit country in the region, the Philippines, two other countries Indonesia and India have done marginally better but the investment and employment in these two countries were also expected to be significantly lower than the pre-Covid estimate of Oxford Economics.
The report said that with the emergence of more contagious coronavirus strains and low vaccination rates, outside of China and Singapore, left many in the region vulnerable to Covid-19 setbacks. In her report, Sian Fenner warned that if the vaccines prove less effective to future strains then the loss in output across the region could be double to the baseline figure and touch the figure of $1.4 billion.
