‘Rapid progress of vaccinations to speed up economic recovery’

KUALA LUMPUR: Economic activity in the Asean region is projected to expand by an aggregate 6.1 per cent this year and five per cent next year, said the Asean+3 Macroeconomic Research Office (Amro).

However, it said the region’s rapid progress in Covid-19 vaccinations would be a game changer for containing the pandemic, giving cause for cautious optimism.

“The road to recovery is paved with vaccinations,” said its chief economist, Hoe Ee Khor.

“With the majority of regional economies on track to achieve their vaccination targets by early next year, we expect the Asean+3 region to grow by five per cent next year, slightly better than our March projections,” he added.

Amro yesterday published an update to its annual flagship report, “The Asean+3 Regional Economic Outlook 2021”.

It said the Asean+3 growth trajectory would depend on how successfully the region transitioned to an “endemic new normal” while dealing with the economic scars left by the pandemic.

Amro added that the adverse impact of the pandemic on the region had been mitigated by unprecedented policy actions and economies that were recovering well had begun to scale back those measures.

“But, given the constant mutation of the virus to more infectious and possibly more vaccine-resistant variants, policy responses will also need to be as nimble and quick to change as the virus.

“Any premature or miscommunicated withdrawal of the financial support measures could potentially trigger a cliff effect.”

Amro group head of financial surveillance and regional surveillance Li Lian Ong said tapering pandemic support would be the great balancing act for the Asean+3 next year.

“Exiting too quickly risks derailing the region’s recovery; exiting too slowly risks propping up unviable businesses and sectors at huge expense to the fiscal purse,” she said.

Amro said any withdrawal of policy support needed to tread the fine line between preserving the remaining policy space and supporting the rebound.

“Achieving both objectives will require successful vaccination campaigns, stronger healthcare systems and transformations of the workforce and industries to address challenges exposed by the pandemic and seizing opportunities in the new normal.

“The observed unevenness in the recovery across sectors and businesses, segments of the population, and individual economies could lead to lasting inequalities and social inequity, if not properly addressed,” it added.