Asia-Pacific losses may hit over $2T as lockdowns ease
CONTAINING the Covid-19 pandemic will cost the AsiaPacific at least $2 trillion in lost household and corporate incomes through next year, said global credit rating agency S&P Global Ratings.
The ratings firm has calculated the economic cost of an initial one-month lockdown could be about three per cent of gross domestic product in the Asia-Pacific.
Its Asia-Pacific chief economist Shaun Roache said: “As t h e Cov i d - 1 9 p a n d e mi c endures, we are learning more about its human, economic and financial costs.
“The next lesson will be about the cost of transition between lockdown and vaccine.”
The global analytics firm now expects economies to enter a transition period where social distancing measures will range between full lockdowns and business-as-usual until mid-2021.
This will involve some social distancing constraints and will differ by country. Complicating matters even more, each country’s position in this continuum seems likely to shift randomly as second and third waves of infections rise and fall, said S&P Ratings.
Economic policies can limit some of the damage during firstwave containment, support the partial recovery through transition, and provide a bridge to the self-sustaining recovery that takes hold in late 2021. However, the costs continue to compound, added the company.
The New York-based firm has revised Asia-Pacific growth to 0.3 per cent for this year from 4.8 per cent before the Covid19 pandemic erupted.
Its growth forecast has been lowered to just 1.2 per cent for China, from 2.9 per cent in the most recent (post-coronavirus) projection, for India to 1.8 per cent from 3.5 per cent, and for Japan it now sees a 3.6 per cent contraction, the previous 1.2 per cent reduction.
Roache said: “From an economics perspective, the main risk now is unemployment. Jobs are easily lost but hard to win back and a surge in unemployment, say by more than four percentage points across the region, would mean a much flatter recovery path.”
Enduring unemployment would cascade to the broader economy, the company added. Consumption would be lower, savings would be higher, and stress may emerge among some of the region’s more leveraged household sectors.
One r isk which has eased for now is a substantia l tightening in US dollar financing cond it ions, sa id S & P. This prov ides greater policy space for emerg i ng market s a nd reduces t he potentia l of triggering a balance of payments instabilit y.