Emerging Asia GDP to remain below pre-pandemic level

MANILA, Philippines — Economic output in emerging Asia hit worst by COVID-19 like the Philippines is expected to remain up to 15 percent below pre-pandemic level in the near term, according to the macroeconomy research firm Capital Economics.

In a report, the London-based research firm said that while the contagion has been kept under control in most parts of Asia, the pace of recovery has been uneven.

China is so far leading the way with the pace of recovery now reaching near pre-pandemic level, a development that can potentially benefit the Philippines as China is a major trading partner.

Capital Economics said China’s economic recovery can be expected to be stronger and more resilient than most expect amid signs that consumer spending is now picking up.

“In the countries hit worst economically, the Philippines and India, we estimate that GDP is still 10 to 15 percent below the pre-crisis level,” Capital Economic said.

“For most, headwinds from high unemployment, increased bankruptcies and continued social distancing will slow recoveries over the year ahead and output gaps are likely to persist,” it said.

Even by the end of next year, economic output in most economies on emerging Asia can still be expected to be around five percent below pre-pandemic level.

Capital Economics said that with inflation remaining to be subdued, most central banks in the region will resume their easing cycles soon to support economies and keep interest rates low for the foreseeable future.

“In contrast, financial markets are now leaning toward tightening before the end of next year in a number of countries,” the research company said.

The Philippines remains under the world’s longest lockdown to control the virus, diminishing consumption and investment.

While a downward trend in the growth of new cases has been observed recently, it now faces a reduction in testing capacity after the Philippine Red Cross stopped conducting COVID-19 tests last Friday.

The humanitarian agency, which has so far been responsible for about a quarter of the country’s testing output, announced that it will resume the conduct of tests only after it is paid the P932 million owed by the government through the Philippine Health Insurance Corp (PhilHealth), the state health insurer.