Improving vaccination coverage and economic reopening can help the Asia-Pacific sustain a recovery that faltered in 2021 due to strict policies, according to S&P Global Ratings.
The Asia-Pacific region succeeded in curbing the spread of the coronavirus that causes COVID-19 early, but a slow uptake of vaccines and the common use of lockdowns weighed on economic activity, Ratings said in a Nov. 30 research note.
"COVID policies in Asia-Pacific have put regional economies on a weaker recovery path than the rest of the world," it said, adding that nations in the region have only gradually started reopening borders and relaxing mobility. As some countries step away from the "zero-tolerance" approach that has held back growth, economic growth can gain momentum.
China, the biggest economy in the Asia-Pacific, has held on to its zero-COVID-19 strategy, and authorities continue to enforce brief but stringent lockdowns to control outbreaks, Ratings noted. "These lockdowns are effective in preventing infections but weaken consumer confidence, spending, and growth."
The world continues to battle the COVID-19 pandemic, and new variants could pose risks to economic recovery. The discovery of the new omicron variant jolted global markets last week. Still, as most countries look for ways to live with the virus, governments have learned to manage the pandemic better.
As the "factory of the world," the Asia-Pacific benefited from the global shift to manufactured goods during the pandemic as consumer services took a hit. Merchandise exports made an outsized contribution to the region's growth, in many cases offsetting weak domestic demand. However, spending could shift back toward pre-pandemic norms as economies reopen.
"This would reverse the benefits that accrued to Asia-Pacific since last year and potentially [lead to] slower growth and trade," Ratings said.
Ratings expects GDP in the Asia-Pacific to grow 6.7% in 2021, a forecast it kept unchanged from the previous quarter. China's GDP may grow 8.0% in 2021, before slowing to a rate of 4.9% in 2022 and 2023, it said.
"The full implications of China's evolving growth model present a key risk to our outlook for Asia-Pacific," said Paul Gruenwald, the agency's chief economist. "Slower growth arising from reining in credit excesses should support sustainable growth down the line. However, curbs on private sector entities could affect productivity gains, which will be a major growth driver for China over the next five years," he said.
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