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With trade languishing and consumer confidence brittle, here’s how Asia can steer economic recovery
- Public investment is back in the economic driving seat. This is the chance for Asia’s policymakers to focus on the vital areas of health care, education, infrastructure and climate change, to move towards more sustainable prosperity
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It is early days: lockdowns may be easing in some places, but the battle has hardly been won. Still, the contours of a future when Covid-19 no longer dominates our lives are becoming visible, especially in Asia. Growth may struggle to return to its former vibrancy; such are the lasting economic scars that pandemics inflict.
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Growth drivers are likely to shift. Trade may be hampered by a desire, among politicians and managers alike, to shorten supply chains.
Bringing the production of critical components closer to home – “onshoring” – may seem like a good way to reduce reliance on China and other production hubs in Asia, and to reduce unforeseen disruptions. Even if the coronavirus has not spared any corner of the world, the instinct is to “secure” supply by producing more domestically.
Consumption, however, may face stiffer headwinds in the months, possibly years, to come. Jobs lost are unlikely to return as swiftly: it takes years to expand employment, and only weeks or months to lose it. In the US, for instance, more jobs have been lost since mid-March than have been created since the 2008 global financial crisis.
Even if the unemployment rate unexpectedly dropped in May, it remains near record highs. In Asia, where reliable employment data is harder to come by, the impact will be severe: over 60 per cent of workers in India are employed in the informal sector, with few protections or ready recourse to income support. Among the few iron laws of economics is this: employment lost cannot be regained with equal speed.
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Migrant workers in Singapore fear job loss after coronavirus quarantine ends
Migrant workers in Singapore fear job loss after coronavirus quarantine ends
That means households will be deprived of purchasing power for some time. But there is more. The build-up in consumer debt in recent years has left many buyers financially exhausted.
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