articles Ratings /ratings/en/research/articles/200417-economic-research-up-next-the-complicated-transition-from-covid-19-lockdown-11441823 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Economic Research: Up Next: The Complicated Transition From COVID-19 Lockdown


COVID-19 Battered Global Consumer Discretionary Sectors But Lifted Staples; Recovery Varies By Subsector


History Of U.S. State Ratings


U.S. State Ratings And Outlooks: Current List


COVID-19 Impact: Key Takeaways From Our Articles

Economic Research: Up Next: The Complicated Transition From COVID-19 Lockdown

There are no short cuts, no silver bullets to help us understand what the human and economic price of the COVID-19 pandemic will be. Only with experience and data can we learn the key lessons, among them: how long lockdowns need to last, how economies can reopen before a lasting medical solution is found, and what lasting imprint this episode will leave across the global economy. Tracking this crisis requires constant updating of our assumptions and models to help us understand what the broad contours of pandemic will look like over the coming years.

We have revised Asia-Pacific growth to 0.3% for 2020 from 4.8% before the pandemic emerged. Compared with a year ago, the peak decline will be during the second quarter, at -1.1%, which would mark the first time the region's economy, in aggregate, has shrunk for at least four decades. Our forecasts now imply a loss in household and corporate income of about US$2.2 trillion, which will be distributed across balance sheets. We expect the level of activity, for the region as a whole, to get close to the pre-COVID-19 trend by 2023. The U-shape is getting flatter. Risks remain on the downside and we are watching the labor market closely.

What We Have Learned--Possible Costs Of An Initial Lockdown

We have learned something useful about the costs of an initial one-month lockdown. Estimates are converging on a full-year hit to real GDP of about 3% in most cases. Add in the impact on prices, which in most cases fall, and we arrive at even larger loss to nominal output. Of course, there are differences across countries. The larger the share of non-discretionary consumption--for example entertainment and personal services--the bigger the cost. The more severe the lockdown, the larger the cost. But 3% seems to be in the right ballpark.

What We Are Now Learning--Costs Of Transition

How costly is the transition between an uncontained outbreak and a vaccine or cure? Secondary waves of infections in Japan, Korea, and Singapore together with the emergence of asymptomatic cases in China are leading policymakers to take a cautious approach to reopening economies. Social distancing should be measured along a continuum, ranging from a full lockdown to business-as-usual. A sensible assumption now is that we will remain somewhere in the middle of this range, but what that will look like remains uncertain. What is more, we may move in either direction randomly as the virus evolves.

What We Will Learn Only In The Future--Long-Run Effects

We can speculate but at this point we do not know what the supply-side effects will be. A permanent impairment to the level of GDP would mean that one of the following must change: labor force, capital both tangible and intangible, or productivity. A plausible case can be made for impairment to any or all of these factors of production. The world will surely change as a result of COVID-19 but that does not necessarily mean the level of activity in the future will be lower. Even if patterns of demand shift, say from travel to healthcare, resources in the economy will move, guided by prices, to accommodate demand.

Debate About The "New Normal" Will Rage On

The debate about the long-run effects will endure, perhaps long after COVID-19 has been addressed by medical solutions. This will not be an academic debate. Views on this will influence how quickly the extraordinary levels of stimulus are withdrawn. If policymakers believe we have reached a "new normal," the clamor to start tightening will intensify. What we learned in the aftermath of the Global Financial Crisis is that some economies tightened policies too quickly when there was still room to run. At the same time, some economies, notably China, did not tighten enough. Both misjudgments led to lasting vulnerabilities.

Our Pandemic Assumptions For Asia-Pacific

We cannot and do not predict the evolution of the pandemic, but we do need to make assumptions to have any sort of view about the economy. Uncertainty, of course, remains high.

We assume that the first-wave of community transmission peaked in March in China and will peak in April for most other economies in the region. In some emerging markets, including India and Indonesia, a peak in reported cases is assumed to come somewhat later, perhaps early in the third quarter.

We expect economies to enter a transition period where social distancing measures will be along a continuum between full lockdowns and business-as-usual until mid-2021. This will involve some social distancing constraints and be country-specific. Complicating matters even more, each country's position in this continuum seems likely to shift randomly as second and third waves of infections rise and fall.

We assume that a lasting medical intervention--a vaccine or cure--emerges around mid-2021 and is widely distributed through early 2022. By 2023, the COVID-19 pandemic, in its current form, will be in the rear-view mirror.

Our Policy Assumptions--A Bridge To The Recovery

We assume that fiscal and monetary policies limit some of the damage during first-wave containment, support the partial recovery through transition, and provide a bridge to the self-sustaining recovery that takes hold in late 2021. Specifically, this means that job losses across the region would be about half as large as they would have been in the absence of measures directly targeting the retention of jobs.

For China, we now expect a stimulus at least as large as the previous three cycles. We measure stimulus through financial conditions and net new credit flows. Our financial conditions index has moved one standard deviation toward easy in the past three months, about half as large as previous easing cycles. We anticipate that China is just half way through its easing cycle.

Our Long-Run Assumption--Fewer Casinos, More Clinics

The structure of demand is likely to change--think less travel more healthcare. Still, we think it is too early to speculate how this will change the supply side of the economy. Factors of production will have to be reallocated to facilitate new demand preferences, which will draw out the recovery. But in most cases, we still expect activity to return close to the pre-COVID-19 trend at some point in 2023 (see chart 1).

Chart 1


Risks Still On The Downside---Jobs, Jobs, Jobs

Pandemic risks still appear skewed to the downside. From an economics perspective, the main risk now is unemployment. As we will show in an upcoming commentary, jobs are "easily lost but hard to win back." A surge in unemployment, say by more than 4 percentage points, would mean a much flatter recovery path in Asia-Pacific. Consumption would be lower, saving would be higher, and stress may emerge among some of the region's more leverage household sectors. The efficacy of wage subsidies and other targeted policies will prove crucial for the climb back from COVID-19.

One risk which has eased for now is a substantial tightening in U.S. dollar financing conditions that would cut policy space for emerging markets and possibly trigger balance of payments instability. Measures by the U.S. Federal Reserve to stabilize domestic credit markets have had positive spillover effects in Asia-Pacific. Other measures, including bilateral swap lines and repo agreements with regional central banks, have eased market concerns about the supply of dollars. This can change quickly but, so far, these measures have proven effective.

Table 1

Real GDP Forecast
Forecasts Change from December 2019 forecast (ppt)
(% year over year) 2019 2020 2021 2022 2023 2020 2021
Australia 1.8 (4.0) 5.7 3.1 2.6 -6.2 3.4
China 6.1 1.2 7.4 4.7 5.3 -4.5 1.8
Hong Kong (1.2) (3.9) 4.8 2.6 2.4 -4.1 2.7
India 5.0 1.8 7.5 6.5 6.8 -4.7 0.5
Indonesia 5.0 1.8 6.3 5.6 5.2 -3.3 1.2
Japan 0.8 (3.6) 3.0 0.9 0.8 -3.7 2.2
Malaysia 4.3 (1.1) 7.6 5.1 4.7 -5.6 3.0
New Zealand 2.2 (5.0) 6.0 3.4 3.0 -7.4 3.5
Philippines 5.9 (0.2) 9.0 6.7 7.0 -6.4 3.9
Singapore 0.7 (3.8) 6.2 2.5 2.5 -5.2 2.6
South Korea 2.0 (1.5) 5.0 3.9 2.5 -3.6 2.7
Taiwan 2.7 (1.2) 4.0 2.6 2.4 -3.6 1.8
Thailand 2.4 (4.2) 6.2 4.2 3.7 -7.0 3.0
Vietnam 7.0 1.2 9.5 7.1 6.8 -5.5 2.9
Asia Pacific 4.7 0.3 6.7 4.6 4.8 -4.5 1.8
Note: For India, the year runs April to March, e.g. 2019-- fiscal 2019 /2020, ending March 31, 2020. ppt--percentage point.

Table 2

Inflation (year average)
(%) 2019 2020 2021 2022 2023
Australia 1.6 0.5 1.0 1.5 1.8
China 2.9 3.2 1.2 1.4 1.6
Hong Kong 2.9 (0.4) 1.0 1.4 1.6
India 4.7 4.4 4.5 4.4 4.4
Indonesia 2.8 2.8 3.3 3.2 3.2
Japan 0.5 (0.8) 0.1 0.6 1.0
Malaysia 0.7 1.1 1.6 1.7 2.0
New Zealand 1.6 0.4 1.0 1.7 1.9
Philippines 2.5 1.0 2.2 2.5 2.7
Singapore 0.6 (0.5) 0.8 1.4 1.8
South Korea 0.4 (0.5) 0.2 0.5 1.0
Taiwan 0.6 (0.5) 0.0 0.5 1.0
Thailand 0.7 (0.5) 0.0 1.2 1.5
Vietnam 2.8 1.8 3.0 4.0 4.5
Note: For India, the year runs April to March, e.g. 2019-- fiscal 2019 /2020, ending March 31, 2020.

Table 3

Policy Rate (year end)
% 2019 2020 2021 2022 2023
Australia 0.75 0.25 0.25 0.50 1.00
India 4.40 3.50 5.00 5.00 5.00
Indonesia 5.00 4.25 4.50 4.50 4.50
Japan (0.07) (0.07) (0.07) (0.07) (0.07)
Malaysia 3.00 1.75 2.00 2.25 2.50
New Zealand 1.00 0.25 0.25 0.75 1.25
Philippines 4.00 2.00 2.50 3.00 3.00
South Korea 1.25 0.50 0.50 0.75 1.00
Taiwan 1.38 0.88 1.13 1.13 1.13
Thailand 1.25 0.50 0.75 0.75 0.75
Note: For India, fiscal years end in March, e.g. 2019-- fiscal 2019 /2020, ending March 31, 2020.

Table 4

Exchange Rate (year end)
vs. US$ 2019 2020 2021 2022 2023
Australia 0.7 0.65 0.67 0.69 0.70
China 6.99 7.11 7.15 7.19 7.23
Hong Kong 7.79 7.8 7.8 7.8 7.8
India 74.4 73.0 74.5 76.5 78.5
Indonesia 13,883 15,300 15,100 14,900 14,700
Japan 109.12 106.0 105.0 103.0 101.0
Malaysia 4.09 4.28 4.24 4.2 4.16
New Zealand 0.67 0.62 0.64 0.65 0.66
Philippines 50.74 53 52.33 51.67 51
Singapore 1.35 1.4 1.39 1.37 1.35
South Korea 1157.8 1200 1150 1100 1100
Taiwan 30.11 30 29.7 29.4 29.2
Thailand 30.15 32.5 32.0 31.7 31.2

Table 5

Unemployment Rate (year average)
(%) 2019 2020 2021 2022 2023
Australia 5.2 7.5 6.8 6.1 5.4
China 3.6 4.9 4.5 4.1 3.6
Hong Kong 3.0 4.5 4 3.7 3.5
Indonesia 5.2 6.2 5.6 5.5 5.3
Japan 2.3 3.3 3 2.7 2.4
Malaysia 3.3 4.3 3.8 3.7 3.5
New Zealand 4.1 6.2 5.6 5.2 4.9
Philippines 5.1 6.8 5.5 5.4 5.4
Singapore 2.3 3.2 2.7 2.5 2.4
South Korea 3.8 5.2 4.7 4.3 3.9
Taiwan 3.7 4.4 4.2 4 3.8
Thailand 1.0 1.9 1.7 1.5 1.4

A Note On Our Coronavirus Assumptions

S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak about midyear, and we are using this assumption in assessing the economic and credit implications. We believe the measures adopted to contain COVID-19 have pushed the global economy into recession (see our macroeconomic and credit updates here: As the situation evolves, we will update our assumptions and estimates accordingly.

Related Research

COVID-19 Deals A Larger, Longer Hit To Global GDP, April 16, 2020.

This report does not constitute a rating action.

Asia-Pacific Chief Economist:Shaun Roache, Singapore (65) 6597-6137;
Asia-Pacific Economist:Vishrut Rana, Singapore (65) 6216-1008;
Vincent R Conti, Singapore + 65 6216 1188;

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, (free of charge), and and (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at

Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: