Asia escapes fresh Covid waves and remains in better shape

The domestic demand backdrop in Asia remains reasonable - not great, but given the backdrop, reasonable. And in large part, this is because few countries are suffering particularly badly from Covid-19. In fact, in some cases, it is virtually absent except for the few cases cropping up in quarantined arrivals.

Even the worst affected countries in APAC don’t look all that bad when viewed against the US or selected European countries. By far the worst affected country is India, with daily cases averaging between 40-50,000. That’s about the same as France today. Adjusted for population, India’s 5,944 cases per million of the population looks small compared to Spain’s 27,042, or the UK’s 15,218, though one might quibble over the comparability of the data.

The two other countries in Asia that have not been having “good” pandemics are Indonesia and the Philippines. Indonesia has already had more than 400,000 confirmed cases in total and the daily case tally is still running at about 3,000. But this is down from its peak of just under 5,000. The Philippines averages something close to 2,000 cases per day, for a total of about 380,000 cases so far. Like Indonesia, although the daily case numbers remain “high”, they are well down from their earlier peaks, of over 6,000, and don’t look too bad on an international basis. Social distancing restrictions remain relatively tight in both countries on a regionally targeted basis, but should both ease this month.

This has the makings of a third wave and will need close watching

Japan has never had a particularly bad outbreak of Covid-19, with just over 100,000 cases in total, and a daily peak during the second wave of just under 2,000. Cases have since dropped, though are heading slowly higher again at about 750 per day. This has the markings of a third wave and will need to be watched closely particularly as its marked seasonality means Japan may have more in common with Europe than with South East Asia.

But Malaysia has also had a second wave of Covid, which is a helpful reminder for other countries in the region that a nice climate is not necessarily strong protection against the virus, though it probably does offer some advantages to colder and wetter countries in the Northern hemisphere. Average daily Covid-19 counts topped 1,200 in Malaysia in October, but are now below 1,000 and trending lower.

Outside of these countries, the numbers remain extremely low. South Korea has a low level but fairly steady daily new case-count slightly in excess of 100. China’s seven-day average of confirmed cases is less than 30, and in Singapore, Hong Kong, Thailand, Taiwan, Australia and New Zealand, average daily cases are in single digits, or virtually zero. Where they do occur, they are usually confined to imported cases for quarantined travellers and pose little or no transfer risk to the broader population.

In Japan’s case, the numbers never really rose high enough to merit the sort of national lockdown response that has been required in other parts of the world

Where cases remain on the high side in the region, lockdowns and other restrictions have typically been put in place quite slowly and often have just chased regional outbreaks with regional mobility restrictions, in much the same way that Europe has been doing until recently. In Japan’s case, the numbers never really rose high enough to merit the sort of national lockdown response that has been required in other parts of the world, though they seem to have been particularly lucky, rather than particularly skilful in stemming the tide of the virus. The national emergency Japan implemented was itself a recommendation rather than mandatory or backed by legal enforcement.

Elsewhere, no single policy seems to have been critical to a successful outcome, though a combination of strong test, trace and isolation capabilities, strict lockdowns when required, strong border controls (being an island helps) backed by effective and enforced quarantines, rapid implementation of all such policies when required, and only slow and phased relaxation seem to provide some factors that other economies might wish to emulate.

It looks as if most of Asia-Pacific will avoid a second wave, and for those that have already had one, a third wave.

GDP per capita disparities are likely to widen further over the coming few years of recovery

That means that for the most part, we can stick with our original base case views for economic activity for the economies of the region. And that is for a continued gradual recovery towards 4Q19 levels somewhere between the end of 2021 and 2022. The timing of this being primarily dependent on how bad a pandemic each economy has had, how long and how weak external demand remains (the international environment), and how much and how effective local fiscal support measures are to offset the economic ravages of the pandemic.

Effective governance to stem the spread of the virus has typically been associated with the higher income-per-capita countries of the region, and so too (not surprisingly) have fiscal support measures. This implies that GDP per capita disparities are likely to widen further over the coming few years of recovery.