Asian nations led the world in the 2020 Covid-19 crash. Now some are stuck with border closures and other rules they’ve imposed to stay safe, potentially putting them behind the states. United and other countries in the direction of global economic recovery.
Countries like China, Thailand and Australia have all but shut down the coronavirus within their borders by closing entry to most foreigners and aggressively suppressing infections that have crept in. Their citizens live almost normal lives and their economies, with few exceptions, have not collapsed. tough like those in the West. China managed to increase its gross domestic product by 2.3% last year.
But this success has made it less urgent for many Asian countries to quickly vaccinate their citizens, as few of them get sick. Most countries in Asia have only vaccinated a small percentage of their population and most Asian economies will not achieve herd immunity until 2022, estimates Goldman Sachs. The United States and the United Kingdom will likely have vaccinated half of their residents by May, according to forecasts by Goldman Sachs.
This could leave some Asian countries in a waiting situation, forced to keep their borders sealed as their populations have developed little natural immunity to the disease, even as parts of the world reopen business and international travel.
“The irony of Asia’s success in controlling Covid-19 is… that Asia will be late in gaining collective immunity,” said Andrew Tilton, Goldman Sachs chief economist for Asia -Peaceful. He said the Americas and Europe could post the biggest economic gains over the next few quarters, as Asia rebounds more slowly – albeit from a more solid base – or in some cases , deteriorates.
Many factors could change this scenario. Vaccine deployment may be delayed or new strains of virus may reduce the effectiveness of inoculations.
Many people in Asia remain happy to agree to tighter travel restrictions and other restrictions, given the trade-off between reducing the death toll.
Date by which regions should have vaccinated 50% of their population
- April: United Kingdom
- May: United States
- June: EU
- July: Australia
- October: China, South Korea
- December: Taiwan
- January: Thailand, Malaysia
- March: India, Indonesia
- May: Philippines
Source: Goldman Sachs estimates
And some Asian countries have adapted well to closed borders. China, which sends more tourists overseas than it receives at home, is benefiting from increased domestic travel spending, while its factories pump goods for the rest of the world.
“Most of the economies that have controlled Covid have become stricter on their borders rather than more flexible, as they have discovered that their national economies can operate at a reasonable level of health without traveling abroad,” said Richard Yetsenga, chief economist at ANZ bank in Australia. .
Still, border closures and other Covid-19 containment policies come at a cost, making it harder for countries to attract investors, foreign workers, tourists and students. Local citizens who need to go abroad cannot return home easily.
In Australia, the border closure has cut by 20% the $ 31 billion it receives from international students annually last year, according to Phil Honeywood, chief executive of the International Education Association of Australia. This year is expected to be worse, with little clarity on when students will be allowed to return.
Ravi Singh, managing director of Global Reach, an agency that helps channel South Asian students to global universities, said he saw a 50% reduction in the number of students registering for recruitment events at universities Australian and a doubling of inquiries about universities in the UK and Canada.
“The situation is a bit dire” for countries like Australia, he said. “Students cannot wait forever.”
New Zealand, which has kept its Covid-19 cases below 2,500 thanks to one of the world’s toughest lockdown and quarantine programs, is taking a hit because it is so dependent on the workforce. foreign work and tourism.
ANZ estimates New Zealand’s economy is likely 5% smaller without tourism, although that hole has so far been filled by a stimulus-fueled real estate boom that won’t last forever, said Sharon Zollner , chief economist of ANZ in New Zealand. She predicts that New Zealand’s borders won’t reopen until late 2021 at the earliest, and more likely early next year, pushing for a full economic recovery in mid-2022.
“People are starting to think that Covid is over and that we dodged a bullet,” she said. “But our forecast actually shows that the economy is going a little bit awry this year.”
Overall GDP growth is still expected to be strong across Asia, in part because last year was so bad, resulting in year-over-year percentage gains look good. Yet many economists believe that Western countries will lead the growth this year.
Moody’s Investors Service recently joined with other economists in setting their forecast for growth in the United States this year, to 4.7% from 4.2% in a previous outlook in November, as vaccinations allow restaurants and other service businesses to normalize and that revival spurs growth.
Consumer demand is rebounding faster in the United States and Europe than in Asia, a trend expected to continue as Asian vaccination rates slow and households remain wary, S&P Global Ratings wrote in a January report. .
“The popular narrative is that Asia is leading the recovery and bringing the world out of a big hole. This is not entirely true, ”the report says.
The psychological strain of trying to prevent even tiny pockets of Covid-19 could weigh on confidence. China, for all of its recent economic successes, is one of the most nervous about epidemics, shutting down neighborhoods and testing millions of residents when a handful of cases surface.
As of mid-February, China had distributed only about 40% of the 100 million doses of vaccine planned before the start of the Lunar New Year holiday on February 12. Goldman Sachs predicts that Chinese GDP growth will rise in the first quarter and then remain stable for much of this year, at a rate of around 5-6%, it would grow normally, while the United States and the Kingdom United will experience very solid second and third quarters.
“The popular narrative is that Asia is leading the recovery and bringing the world out of a big hole. This is not entirely true. ‘
Thailand, where up to 20% of the economy was linked to tourism, is probably one of the worst victims of border closures. The country’s economic planning agency has repeatedly slashed economic growth forecasts for 2021 and now predicts that the number of foreign visitors this year will be 3.2 million, less than a tenth of 2019’s total.
To achieve this, the agency assumes that Thailand will be able to immunize around 50% of its population by the end of this year – a guess some experts believe is optimistic. The kingdom just launched vaccinations this week, with a relatively low number of initial doses.
In southern Phuket Island, companies are urging the Thai government to let them pay privately to vaccinate hotel, restaurant and travel agency workers so they can have the confidence to let visitors in foreigners. Without such private intervention, Phuket is unlikely to be able to achieve herd immunity for at least a year and a half – an untenable situation, said Bhummikitti Ruktaengam, chairman of the Phuket Tourism Association.
Then there’s the Cook Islands, a small Pacific nation between New Zealand and Hawaii, where tourism accounts for around 80% of the economy. ANZ estimates that its GDP fell more than 5% last year and will contract another 15% this year.
The country sealed its borders last March and has never had a case of Covid-19. The next proposed date to open the borders to New Zealand, its biggest source of tourists, is the end of this month. But with a recent spate of infections reported in Auckland, people in the Cook Islands are skeptical.
Paul Ash, owner of an 18-room resort on the main island of Rarotonga, said the company had lost 90% of its revenue and shareholders were injecting nearly $ 16,000 a month to keep it afloat. He thinks his seaside resort and others around the island can last a few more months.
“It will come to a point where it cannot be recovered,” he said. “And we are not far from it.”
Write to Phred Dvorak at firstname.lastname@example.org
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8