Receding daily COVID-19 cases, rollout of vaccines, increased spending by the governments along with easing of monetary restrictions will help revive the Association of Southeast Asian Nations (ASEAN*) economies in 2021 with their real GDP forecasted to rise by 6%, says GlobalData, a leading data and analytics company.
Despite the contraction in real GDP in 2020 amid the lockdown restrictions due to the pandemic, ASEAN countries are expected to witness a sharp V-shaped recovery in 2021. From mid-September 2020, most of the ASEAN countries exhibited a declining trend of COVID-19 cases. The fatality rate declined to 2.7% in Indonesia, followed by the Philippines (2.1%), Malaysia (0.4%), Thailand (0.3%), and Singapore (0%) as of February 2021.
Gargi Rao, Economic Research Analyst at GlobalData, says: “Due to the implementation of non-tariff measures on essential goods among the ASEAN nations, trade is expected to increase in 2021. Trade windows are set to open for ASEAN nations with the signing of Regional Comprehensive Economic Cooperation (RCEP) in November 2020, which will further spur economic integration. Furthermore, the continuous support from Australia and New Zealand will help ASEAN nations to construct a comprehensive regional development plan to address the ongoing COVID-19 challenges, and other transboundary issues, thereby posting a sharp recovery in H2 2021.”
The six largest ASEAN nations (Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) are expected to witness positive real GDP growth rates in 2021. With continued expansion of trade and gradual recovery in tourism sector and construction activities, Singapore’s GDP growth is forecasted to increase to 5.8% in 2021. Similarly, Malaysia is set to witness a growth of 7.1% in 2021, an uptick from -5.2% in 2020.
GlobalData forecasts Vietnam to be the fastest growing economy with a real GDP growth of 8.5% in 2021. Vietnam’s growing trade with the EU and its robust fiscal policies have helped the economy to witness an uptick in manufacturing and service sectors growth. According to GlobalData, year-on-year (Y-o-Y %) retail trade growth increased from 8.5% in November 2020 to 9.4% in 2020. A strong demand, effective vaccine rollouts and resilient supply chains have put the economy on a faster recovery path.
Ms Rao continues: “The purchasing managers’ index (PMI) for manufacturing was below 50 in April 2020, indicating a steep contraction in economic activities with travel restrictions and lockdowns in place in all major ASEAN nations. Manufacturing PMI for Indonesia contracted to 27.5, followed by Malaysia (31.3) and the Philippines (31.6) in April 2020. Easing of restrictions and resumption of business activities from May 2020 onwards resulted in a gradual recovery of the PMI manufacturing index.
Singapore witnessed an uptick of 52.9 in PMI for manufacturing in January 2021 followed by Philippines (52.5), Indonesia (52.2) and Vietnam (51.3). With improving health sector, global vaccine rollouts, gradual recovery in global demand and strong output growth, the ASEAN manufacturing sector is set to rebound in 2021.
Ms Rao concludes: “Increasing investment and recognizing open trade are key to put ASEAN economies on a steady growth path, along with effective vaccination for COVID-19 in 2021. An uptick in retail trade and growing demand for e-commerce will bring in new capital to spur growth. The new free trade agreements among ASEAN, Australia and New Zealand will bring in new trade and employment opportunities for 2021 and beyond. The need of the hour is to facilitate business activities through effective cooperation among the ASEAN nations.”
*ASEAN includes Indonesia, Thailand, Singapore, Malaysia, Philippines, Vietnam, Myanmar (Burma), Cambodia, Brunei, Laos.