APAC to lead economic recovery post COVID-19 recession

Moody's Analytics chief APAC economist Steve Cochrane said this is after much of the region will have regained all of its lost output by the end of 2021, although India and the Philippines will struggle to reach this benchmark by the end of 2022.

"The region has much managed to contain the spread of COVID-19 as governments continue to work in obtaining sufficient vaccine supplies," he said in an analytics note today.

Cochrane said the region’s manufacturing supply chains are fueling economic rebound on demand for goods related to the pandemic recovery such as computers, mobile phones, information technology (IT) systems, pharmaceuticals, and personal protective equipment-and consumer durable goods such as autos and household appliances, as well as holiday-related consumer goods.

On the other hand, he said policy has remained consistently supportive and should continue to be so through 2021.

In addition, the expected shift in US foreign policy under the upcoming administration of President-elect Joe Biden will also benefit the region, especially in deescalating the tensed relation between Washington and Beijing.

"The uncertainty that has weighed on global trade over the past two years will be lifted. The threat of higher tariffs on China's exports to the US, or broader tariffs applied to goods exported by other APAC countries that have trade surpluses with the US, is expected to be stepped back," he said.

In terms of monetary policy, he said that all the region’s central banks have quickly lowered their policy interest rates either to near zero or to historic lows when the pandemic became evident.

"Fiscal policy is also supportive and should remain so in the coming year.

"Malaysia, Singapore, Australia, Japan and Thailand stand out in terms of the amount of fiscal stimulus, and the targeted nature of their spending plans toward direct payments to households, support of small and medium industries, and extended assistance to hard-hit industries such as travel and tourism, which may well be the last sector to recover from the impacts of the pandemic," he said.

However, Cochrane warns of near-term risks which could impact the regions recovery, including emerging COVID-19 clusters in the region that are not effectively contained, and similarly, much more strict economic shutdowns in Europe and North America that would staunch the rebound in global demand for goods.