The COVID-19 pandemic is causing a deeper contraction to the Asian Pacific economies, said the APEC Policy Support Unit.
A new updated report from the unit finds that the Asia-Pacific Economic Cooperation (APEC) region’s economic growth was now expected to decline by 3.7% in 2020, down from its initial forecast of a 2.7% contraction in April, bringing the total output loss to a staggering US$ 2.9 trillion.
The new projections are in line with the revisions by the International Monetary Fund (IMF) in its recently-updated World Economic Outlook.
“Global growth is projected to fall to 4.9%, compared to a decline of 3% estimated earlier by the IMF,” the APEC unit said.
Its director Dr Denis Hew said the protracted duration of the pandemic had caused worse than anticipated impacts on the global economy, with some economies recently reporting a second wave of infection cases.
“The economic recovery is on the horizon but it is highly dependent on the availability of vaccines and treatments as well as the effectiveness of economic policies that are being implemented by economies to address the pandemic,” said Hew.
The updated report projects an economic recovery for the region of 5.7% in 2021, compared to the earlier estimate of 6.3%.
The potential rebound hinges on whether the pandemic can be contained over the second half of this year.
It also reported that the APEC region’s growth had contracted 2.2% in the first quarter of this year due to travel restrictions and widespread lockdown measures that depressed domestic consumption, trade and investment activities.
“Merchandise trade recorded a bigger contraction in the first quarter from the combined impact of trade tensions and supply chain disruptions,” it said.
Meanwhile, APEC Policy Unit’s researcher Rhea C. Hernando said in overall terms, merchandise trade in the region had significantly decreased in both value and volume this year.
The temporary restrictions imposed on food and medical supplies had weakened trade even further in the first quarter of the year, said Hernando, who wrote the report.
“The region’s value of trade in goods dropped by 5.8% for exports and 4.1% for imports.
“Foreign direct investment shares similar sentiment with inflows to the APEC region going down by 3.1 per cent, while greenfield investments dropped sharply by 20.4 per cent in 2019,” he said.
In the midst of uncertainties, the report recommended APEC economies to take decisive actions.
This included intensifying efforts towards containment measures to avoid further waves of the pandemic, while at the same time maintaining fiscal and monetary stimulus measures to help alleviate the risk of people falling into poverty and businesses going bankrupt.
The report also urged member economies to invest in digital technology, including building or boosting technological infrastructure, equipping workers with digital skills and modernising business and governance processes.