KUALA LUMPUR, March 16 — The Asia-Pacific (Apac) economy continues to lead global growth as vaccines begin to be rolled out throughout the region as well as across the globe, according to Moody’s Analytics.
The region will be supported in the second half of this year by increased immunity and less social distancing despite logistical difficulties that hinder the pace of vaccination in many parts of the world.
Its chief Apac economist, Steven Cochrane, said the emergence of North America and Europe from Covid-19 restrictions will also drive global consumer and business spending, while additional fiscal stimulus in the US will accelerate this trend as well.
“There are near-term risks, however, to this optimistic outlook if the pace of vaccination does not accelerate, and if movement restrictions are eased too early before there is broad immunity,” he said in a note today.
Beginning in 2022, Cochrane said there are risks to the continued rapid pace of economic expansion as fiscal policymakers throughout the region grapple with the need to rein in budget deficits.
Correspondingly, financial institutions begin to recognise and accommodate for non-performing loans and potentially tighten lending standards.
“But there is upside potential as well to the outlook as the region overcomes vaccine logistical obstacles to speed its distribution beyond expectations, and the potential for the large US fiscal support package to have larger multiplier effects throughout the globe,” he said.
Cochrane also pointed out that most of the Apac region’s manufacturing supply chains have spun into high gear, as indicated by rising industrial production around the region and solid growth of exports.
The gains in trade are consistent with rising industrial production as demand for electronics, autos and textile products is improving, he said.
“For commodities producers such as Indonesia and Malaysia, rising prices for crude oil, palm oil and other commodities contribute to the rising value of exports.
“In fact, fiscal policy would also continue to support economic recovery while the vaccine rollout continues.”
Cochrane said Malaysia, Singapore, Japan, Australia, and Hong Kong have all continued to provide modest stimulus via targeted deficit spending this year on top of rather aggressive fiscal stimulus last year.
“This may limit economic risks from potential stumbling blocks that vaccination may face.
“This is particularly important for Malaysia and Singapore, which are relatively small and open economies that still have a way to go towards full economic recovery,” he said.