Average GDP in Asean could bounce back to 8% by 2021: ICAEW report

ECONOMIC growth in the Asean region could rebound to an average 8 per cent in 2021 on the back of recovery in Chinese import demand and global trade, after falling into recession in the first half of 2020, a report suggested on Monday.

The report, written by Oxford Economics and commissioned by the Institute of Chartered Accountants in England and Wales (ICAEW) suggested that most South-east Asian economies will fall into recession in the first half of 2020 before recording a 1.9 per cent contraction for the full year.

On the whole, the Covid-19 pandemic is likely to cause the global economy to shrink by 4.7 per cent, the report said. This is more than double the impact of the global financial crisis in 2008 and will be the biggest global recession in post-war history.

Oxford Economics believes Thailand will be one of the worst hit in South-east Asia because tourism and travel account in particular for 20 per cent of its gross domestic product (GDP).

On the other hand, Vietnam will emerge the least affected with its lead in unwinding measures as compared to other countries in Asean, although it is not immune to the sharp slowdown in trade flows, the report said.

"The adverse impact on South-east Asian economies is forecast to turn the corner in the second half of 2020 as Chinese import demand and global trade recover at a consistent pace, while a slower pace of normalisation will continue to weigh on tourism-dependent economies," the report said, adding that coordinated fiscal stimulus packages and monetary easing from authorities across the region will support the recovery in economic growth.

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Mark Billington, ICAEW regional director for Greater China and South-east Asia, said: "Beyond a global health and economic crisis, the pandemic is also an important chapter of an unfolding bigger interconnected catastrophe of climate emergency, massive biodiversity loss and increasing inequality.

"Our recovery will need to include sustainable solutions that benefit nature, society and economy. As countries in the region gradually ease lockdown restrictions and start to open their economies, organisations and businesses will have to adapt to a 'new normal' for sustained growth and performance in the post-outbreak world."

He noted that the worst may have passed in China, and gradual growth is expected with a recovery in consumption, reduced supply-side disruptions, and improved investment prospects especially in new industries and infrastructure, all supported by strong government policies.

China's reopening is also a tell-tale sign that oher economies in the region will bounce back with time, he pointed out. However, any recovery in the second half of 2020 is unlikely to make up for lost activity in the first half of the year, he said, adding that global GDP is only expected to return to pre-crisis levels by mid-2021.