SINGAPORE – Hit by the Covid-19 outbreak, economic growth in the Asia-Pacific region may suffer a record decline this year.
The Asia-Pacific Economic Cooperation (Apec) expects the region’s real GDP growth to drop by 2.7 per cent, with prolonged trade tensions and lower commodity prices reinforcing the pandemic-driven slump.
The contraction would amount to an output loss of US$2.1 trillion for the region and an additional 23 million unemployed workers due to the economic fallout from the pandemic.
The grim forecast was presented in the latest APEC Regional Trends Analysis report prepared by the regional group’s Policy Support Unit.
Apec is a 21-nation regional economic forum established in 1989 to leverage the growing interdependence of the region’s economies. Apec members together account for about 40 per cent of the world’s population and 60 per cent of global GDP.
The report, delivered to the Virtual Extraordinary Senior Officials’ Meeting on Wednesday (May 28), shows the region’s economic growth was already slowing, coming at 3.6 per cent in 2019, compared to 4.2 per cent in 2018.
Last year’s slowdown was accompanied by a substantial decline in merchandise trade volume and value in the Apec region due to the implementation of various trade-restrictive measures, such as anti-dumping, tariffs, duties and other levies.
“Persistent uncertainty is testing our resilience,” said Dr Denis Hew, Director of the Policy Support Unit, at a virtual press briefing on Thursday (May 28).
“Trade and technology tensions and post Brexit concerns all contributed to the lacklustre economic activity in 2019. The severity and uncertainty as to the duration of the Covid-19 pandemic further aggravate the ongoing challenges,” he added.
However, in contrast to the merchandise trade numbers, the region’s services sector remained positive in 2019, aided among others by the increasing demand for digital technology services and automated services solutions.
Apec foresees a global economic rebound in 2021, with the APEC region growing by 6.3 percent.
This rebound hinges on containing the Covid-19 pandemic by the second quarter of this year and the effectiveness of economic stimulus measures in supporting economic recovery.
The report noted that economic activity has been on a near standstill so far this year, as economies implemented stringent measures to contain the pandemic, including travel bans, quarantines, lockdowns, and social distancing measures.
To mitigate the economic impact of containment measures, Apec members have responded with fiscal and monetary support as well as stimulus packages. The measures are targeted at bolstering health systems and providing direct support to households and businesses, including micro, small and medium enterprises.
The report stressed that regional cooperation will be crucial during the Covid-19 outbreak and should be sustained and strengthened to ensure resilience and the revival of regional growth going forward.
Economies should come together to exchange health information, keep open the supply chains for medical and food products and coordinate policy responses, it recommended.
These policy responses can ensure the free flow of medical goods and food supplies, improved access to and capacity of health systems, support for business and trade activities and a decisive move towards digitalization to catalyse economic activities in the region.
“Closer ties and cooperation between members are vital for ensuring the availability of credible and updated information to help policymakers around the region to develop appropriate policy responses at an exceptional scale,” said Dr Rebecca Sta Maria, APEC Secretariat’s Executive Director.
The pandemic has wide-ranging repercussions, from personal to global, with great costs to lives and livelihoods.
Businesses, particularly micro, small and medium enterprises, are facing immense challenges, not least of which are possible closures due to supply chain disruptions and plunging customer demand.
The report cited a survey conducted by the Institute for Supply Management in March, according to which almost 75 per cent of surveyed companies reported some form of supply chain disruption due to pandemic-related restrictions in transportation, with one in six companies downgrading their revenue targets for the year.
Apec economies have exempted cargo and trade related transport from border controls. However, restrictions in the movement of vehicles coupled with the introduction of alternative routes have intensified logistical bottlenecks,adding another layer of difficulty in the trading environment, weakening trade activity and affecting both exporters and importers.
At the virtual briefing, Apec officials said some Apec members were working to develop a pandemic policy toolkit that would provide options and planning guidance amid a health emergency and bring resilience to the region’s supply chains. The kit will include tools such as supply chain mapping and inventory planning and management.
Trust and cooperation among Apec economies will help reconnect supply chains and find more innovative ways to do business and trade, said Dr Hew.
The officials said member countries were already working on resuming essential travel to facilitate global supply chain management. They pointed out the recent agreement between Australia, Canada, South Korea and New Zealand to resume essential cross-border travel, while balancing public health considerations.
The Apec report also mentioned the negative impact of the travel bans on the tourism industry, which currently accounts for an estimated 10 percent of global GDP.
It said the World Travel and Tourism Council (WTTC) has warned that loss of income from three months of stoppage in global travel could translate to a 12 to 14 per cent reduction in jobs. The WTTC projects that this pandemic could lead to 50 million fewer jobs, 60 percent of which would be in Asia.
The report said that Apec members should take advantage of the forum’s open and voluntary environment to commence the work towards coordinated policy responses.
“The road to economic recovery is to implement measures today to strengthen supply chains and stimulate demand so that lives and livelihoods will continue to be preserved beyond the pandemic. Policy action today – swift, significant and coordinated – will help economies recover stronger and ensure that APEC as a region remains relevant,” the report said.
Dr Rebecca Sta Maria said the Apec ministers meeting in June is likely to go ahead and will decide on a firm date for the Apec leaders meeting originally scheduled for November in Kuala Lumpur.
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