Most Asean economies face near-term scarring from Covid-19 pandemic: Moody's

MUCH of the Asia-Pacific (APAC) faces "deep economic scars" from the Covid-19 pandemic - including most of Asean, a new report has suggested.

Some seven in 10 economies are expected to notch short-term output declines of at least 2 per cent - complicated by trends such as automation.

While APAC economic growth is tipped to rebound in 2021, Moody's Investors Service warned on Tuesday that "the overall resiliency of the Asia-Pacific economy masks a range of output losses" across individual markets.

Moody's analysts anticipate "modest" output declines of 2 per cent to 8 per cent by 2023 in lower to upper middle-income economies that have "moderate exposure to tourism" or are grappling with virus outbreaks, such as Malaysia, Indonesia and Thailand.

Vietnam also fell into this category, on the back of a slow vaccine roll-out. Still, its output losses are expected to be capped by its trade exposure, as a supply-chain shift away from China favours Vietnam's economic fundamentals and operational track record.

Meanwhile, Moody's forecasts deeper scarring of more than 8 per cent in South-east Asian economies such as Cambodia, Laos and the Philippines, on factors such as limited fiscal capacity and worsening Covid-19 outbreaks.

"The pandemic is widely expected to accelerate automation, as companies increasingly turn to technology to respond to labour shortages resulting from virus containment measures," the report added. "This could put some activities that can be automated at risk, such as apparel industries, which form a large part of the economies in Cambodia and Bangladesh."

On the other hand, several APAC markets are still expected to post strong growth and return to pre-pandemic economic levels by 2023 - such as Taiwan, mainland China, Japan, South Korea, and Singapore.

Moody's noted: "These economies mainly have high incomes, mature institutions, strong healthcare infrastructure and dynamic labour markets."