The Philippines, one of the largest economies in Southeast Asia, is expected to continue its poor economic performance this year due to elevated and persistent infection cases, according to the latest report of the UN Conference on Trade and Development (UNCTAD).
According to the UNCTAD’s Trade and Development Report Update: Out of the Frying Pan…Into the Fire”, the growth rate of the Southeast Asian Region as a whole was similarly below its mid-2020 expectations as other large economies in the region, namely Malaysia and the Philippines, also underperformed vis-a-vis its expectations.
According to the report, both Philippines and Malaysia “struggled with elevated and persistent infection rates, which were met with restrictions on population movements. The economic fallout of these restrictions has been predictably severe, with substantial output contractions in both countries, although in Malaysia active fiscal policies partially offset the fall in private consumption spending.”
Indonesia, the largest economy in ASEAN, was also below UNCTAD’s mid-2020 growth expectations as the size of the fiscal stimulus turned out to be significantly smaller than estimates based on initial indications of the government’s response to the pandemic.
For Thailand, UNCTAD said that the sharp output contraction was consistent with its mid-2020 expectations, as the country’s reliance on tourism proved a key vulnerability in a year of widespread travel restrictions.
The only significant positive surprise in the region has been Viet Nam, whose growth in 2020 exceeded UNCTAD’s expectations. The country’s success in containing the virus’ spread helped to ensure a quick bounce back in activity, while the export sector continued to perform well despite the shortfall in global demand.
As a result, UNCTAD has revised upward its projection for the region’s economic growth in 2021. This is largely due to the greater than anticipated contraction in 2020, which should engender a steeper recovery in 2021. UNCTAD, however, expects an upturn in private consumption and exports throughout the region which will drive the rebound in growth this year.
Overall, UNCTAD said, the global economy is expected to grow by 4.7 percent in 2021, faster than predicted in September.
“The stronger recovery this year will still leave the global economy short of $10 trillion at the end of 2021 compared to pre-pandemic trends, with many developing countries hit the hardest,” it stated.
Weak multilateral cooperation with untackled problems of inequality, indebtedness and insufficient investment threaten hopes for a more resilient future, UNCTAD said.
It said that today’s interdependent world, inhibited by sluggish investment and slowing productivity growth, suffering from an enduring pandemic and threatened by a fast-deteriorating climate crisis, is only as resilient as its weakest participants.