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IMF: Everything you need to know about Asia’s ‘multispeed’ recovery

Our latest Regional Economic Outlook shows that a recovery started in the third quarter, but growth engines are not all firing with the same power across countries, leading to a multispeed recovery.

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Despite some signs of rapid growth in some parts of Asia-Pacific, not all countries are bouncing back at the same speed.

This is ‘multispeed’ recovery is outlined in the IMF’s latest Regional Economic Outlook.
The IMF warns it could lead to increased inequality and indebtedness across the region.

The Asia-Pacific region is recovering from its worst recession in living memory. Our latest Regional Economic Outlook shows that a recovery started in the third quarter, but growth engines are not all firing with the same power across countries, leading to a multispeed recovery.

To enable structural change, Asia’s economic policies should be focused on the world of tomorrow, not yesterday.

Reflecting worse-than-expected outturns in the second quarter in a few countries, the IMF’s forecast for the region has been downgraded to -2.2 percent in 2020—the worst outcome for this region in living memory. India’s economy experienced a much sharper than expected contraction in the second quarter—24 percent on a year-over-year basis—and is expected to recover slowly in the coming quarters.

China, which suffered the pandemic’s blow earlier than other countries, has seen a strong recovery after the first quarter lockdown, and growth has been revised up to 1.9 percent this year, a rare positive figure in a sea of negatives. Advanced economies (Australia, Korea, Japan and New Zealand), while still in recession, are expected to do somewhat better than expected in 2020, reflecting a faster pickup in activity following earlier exit from lockdowns.

Drawn-out recovery

The good news is that we expect the region to grow by 6.9 percent in 2021. But even with this boost, output will be lower at the end of 2021 than our pre-pandemic projection. The scars will be deep: with declining labor force participation and weak confidence dimming private investment, potential output by the middle of the decade could be some 5 percent lower than before the pandemic.

Lessons and challenges

The Asia-Pacific region went into this crisis first and many of its economies are emerging from it first as well. What lessons can the world learn from this experience?

First, an early public health response, when infection rates were still low, was an essential steppingstone to flattening the virus curve. Second, relaxing containment measures only after the virus has been suppressed—and with appropriate post-lockdown policies (such as testing and contact-tracing) in place—is associated with better economic outcomes. On both counts, Asia has done well in comparison to other regions, probably due to its experience from previous pandemics. Third, fiscal support has also been critical to reduce economic costs and underpin the recovery. Here Asia has pulled its weight with significant policy stimulus.

How the recession affects Asia’s various economies.

Risks ahead

Prospects for a global trade-led recovery look dim, because of weak global growth, closed borders, and festering tensions around trade, technology, and security—despite the boost to the region from China’s recovery. Diversifying Asia’s economies away from over-reliance on exports is a work in progress: a fundamental reorientation toward domestic demand will take time and presents an exceptionally difficult challenge for the smallest economies (such as the Pacific islands) and more generally, those reliant on tourism.

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Ecommerce

Pakorn Peetathawatchai, President, The Stock Exchange of Thailand (SET)

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Pakorn Peetathawatchai, President, The Stock Exchange of Thailand (SET)

What measures has SET taken to support listed companies’ compliance with ESG standards?
PAKORN PEETATHAWATCHAI:

PAKORN: When we first began promoting ESG-compliant investments, we were met with little interest. We attributed this to a lack of clear data to showcase the economic benefits of ESG investment, and perhaps limited clarity as to what constitutes a sustainable or ESG-compliant investment. The launch of the THSI list and, subsequently, the SETTHSI Index, was designed to address this. Our most recent data, comparing returns for the SETTHSI Index with the broader SET and SET100 indices from April 2020 to April 2021, underscores the economic benefits of these investments: the group compliant with ESG standards outperformed the other two indices on every data point. 

As of May 2021 Thailand was home to CG and ESG assets under management totalling BT54.8bn ($1.7bn) across 50 funds – up from 23 funds in 2019. Meanwhile, of the BT187.1bn ($5.9bn) raised in green, social and sustainability bonds since 2018, BT136.4bn ($4.3bn) was raised in 2020 – 83% from the government and the remainder from development banks and private players. This rising demand, in a move to manage risk and generate returns, has been complemented by growing supply and promotion: supply from ESG-compliant businesses aiming for resiliency and sustainable growth, as well as promotion from regulators highlighting investment opportunities with good CG and SD practices. Indeed, the pandemic has been a catalyst in shifting the view of ESG compliance from a luxury to a requirement in the new normal.

In what ways can enhanced standard-setting and regulatory mechanisms overcome the remaining barriers to improved ESG performance?

PAKORN: A multi-stakeholder approach is crucial for enhanced ESG performance – not only in Thailand, but around much of the globe. This can also help to address the standout incumbent challenge: access to reliable, wide-ranging ESG data. For example, the 2020 update to the 56-1 One Report established clear ESG standards and triggered online and offline capacity-building programmes to support listed firms’ compliance. SET is developing an ESG data platform with a structured template to promote the availability of comparable data, maximise value added from corporate sustainability disclosures, and foster collaboration between the business value chain and stakeholders. This is expected to support Thai companies along their ESG journey in an economically sustainable way, result in a greater number of sustainability-focused products and services, drive sustainable investing in the Thai investment community and ultimately “make the capital market work for everyone”, as outlined in the SET’s vision.
 

 

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Economics

Youth unemployment hits new highs in Thailand due to COVID-19 restrictions

BANGKOK, Thailand (ILO news) – Joblessness among young men and women in Thailand has reached a level unseen in recent years due to the impact of the COVID-19 pandemic, according to a new brief from the International Labour Organization (ILO).

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Coronavirus disease 2019 (COVID-19) WHO Thailand Situation Report - 22 February 2021

The Thailand labour market update  found that youth employment fell by 7 per cent in the first quarter of 2021 (from the fourth quarter 2019). The youth unemployment rate increased by 3 percentage points for both men and women, reaching a high of 6 per cent and 8 per cent, respectively.

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