China's Covid policy adding to headwinds confronting Asean

CHINA'S dynamic zero Covid policy will have an impact on Asean in the coming quarters, particularly on the tourism and trade fronts.

Speaking at the Asean Economic Outlook: Prospects for Growth and Regional Cooperation webinar on Thursday (April 28), Anthony Tan, deputy group head and senior economist, Asean+3 Macroeconomic Research Office (AMRO), noted that the prospects for strong recovery for the tourism sectors in tourism-dependent economies such as Thailand, Cambodia and Vietnam are "unlikely to be bright until China fully reopens its borders.

Citing data from AMRO's Asean+3 Regional Economic Outlook, Tan noted that they expect the Asean+3's GDP to come in at 4.6 per cent this year, a downgrade from 4.9 per cent.

The downward revision is solely attributed to China, including Hong Kong, where they reduced their growth forecast from 5.5 per cent to 5.2 per cent for China, and from 3.6 per cent to 2.8 per cent for Hong Kong. The growth outlook for Japan and Korea remains unchanged at 3 per cent.

Separately, the disruptions and lockdowns in major cities in China in response to the current wave of the pandemic has significantly affected shipping and road transport.

"This will exacerbate supply chain disruption and will be more visible as the data comes in in a couple of months," said Tan. "The frictions caused by these disruptions could really undermine the outlook for exports, potentially stifling the recovery this year."

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Anita Prakash, senior policy adviser, Economic Research Institute for Asean and East Asia, too picked up on this theme. While Covid-19 led to a reduction in global trade, the rebound, especially for Asean, has been driven by the economic recovery in China.

"Demand from China was the main reason for the resilience of Asean exports but new lockdowns and quarantine rules, now in place again in China, will affect the export performance of Asean at least in the next two quarters," she said.