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The Future of Asia: greener but with a public and private debt hangover

The COVID-19 pandemic has been a perfect storm, destroying jobs, worsening poverty and inequality, and creating a public and private debt problem—especially for countries and firms already in fragile financial health beforehand




The Sydney Opera resumed live performances and the city of Melbourne recently hosted the Australian Open tennis tournament with fans (mostly) in attendance.

Japan is back to planning the delayed 2020 Summer Olympics, while China focuses on the Beijing 2022 Winter Games. Having been hit by COVID-19 first, Asia is also recovering first. At the pandemic’s first anniversary, is the region back to full health?

Asia must remain agile and innovative to exit the crisis in a durable, greener, and more equitable way

The best answer is that it is too early to know for sure. The pandemic exacerbated existing long-term issues: slowing productivity growth, growing indebtedness, aging population, rising inequality, and managing climate change. A new IMF staff paper looks into how the region can navigate these multiple challenges.

Long-lasting effects

If past experience is any guide, this pandemic will have long-lasting effects. A look at past recessions in advanced economies reveals that on average, five years after the start of a recession, output is still almost 5 percent below its precrisis trend and unlikely to ever catch up.

The COVID-19 pandemic has been a perfect storm, destroying jobs, worsening poverty and inequality, and creating a public and private debt problem—especially for countries and firms already in fragile financial health beforehand.

Coronavirus disease 2019 (COVID-19)
The COVID-19 pandemic has been a perfect storm, destroying jobs, worsening poverty and inequality

This unprecedented economic disruption has the potential to leave lasting scars for years to come, arising from persistent declines in the capital stock, employment, and productivity.

The Future of Asia

Asia’s labor markets suffered, with unemployment surging, labor force participation plunging, and job losses concentrated in industries with lower wages and among women and youth. The poorest and most vulnerable were disproportionately hit, exposing severe gaps in social protection and exacerbating already high inequality in advanced and emerging Asia.

Public and private debt hangover

In the pandemic’s aftermath, many countries will have to contend with high public and private debt burdens—possibly too large for some to manage. Sovereign debt is an issue in small states. Tackling this issue will require extra focus on revenue mobilization, public finances, and debt management, with support from multilateral partners and debt relief providing some breathing space.

The Future of Asia: Public and private debt hangover
The Future of Asia: Public and private debt hangover

In larger emerging markets, the main problem might be record-high private debt. More and more companies are not generating enough earnings to service their debts. Government support is helping them to keep afloat, but a large wave of corporate bankruptcies could follow when that support is withdrawn, and in the absence of other interventions.

This vulnerability can be especially acute in Asia, if global financial market conditions tighten in the process of recovery, leading to capital outflows and additional pressure on the corporate sector.

To address this vulnerability, countries would need to reinforce private debt resolution frameworks, ensure the availability of adequate financing, and facilitate access to risk capital to speed up the reallocation of resources towards growing sectors.

Measures for unconventional times

Most countries provided significant fiscal and monetary policy support to cushion the blow. Many—especially emerging and developing economies—are resorting more to unconventional monetary policies to ease the pressure on banks and borrowers.

India, Sri Lanka and Nepal announced debt service moratoria and targeted lending schemes to provide relief to households and firms. Financial regulation requirements related to capital and liquidity coverage were loosened. Malaysia and Thailand provided extra liquidity to firms through central bank lending operations, while Indonesia and the Philippines used large-scale asset purchases.

While warranted, these more aggressive policies inevitably entail risks, which will increase the longer they are used. Policymakers would be wise to focus on minimizing distortions and developing clear exit strategies for the unconventional measures adopted.

Healing the scars

To prevent longer-term economic “scarring,” the future of Asia needs to expedite economic reforms to boost productivity growth and investment, allow for adequate reallocation of resources across sectors, and support workers affected by the transition. The package could include well-targeted hiring subsidies and worker retraining schemes; infrastructure upgrades; simplifying business processes; and reducing the regulatory and tax burden.

These actions need to be combined with a broader push for upgrading social safety nets to bring workers into formal systems, while supporting the vulnerable with targeted conditional cash transfers.

Towards a greener future of Asia

Paradoxically, the COVID-19 shock also provided a glimpse of what a better future could hold for the future of Asia. The temporary re-allocation from energy-intensive sectors, such as airlines and transportation, provides an opportunity for job creation in more productive and cleaner sectors. A well-designed carbon tax package and complementary product and labor market policies could support capital re-allocation and labor reskilling.

This would benefit the global fight against climate change, as Asia-Pacific has some of the largest carbon dioxide emitters and polluters, and could lead to improved health conditions for local populations, better jobs, and more resources to meet developmental needs.

Reforms in healthcare, social safety nets, labor markets, and the corporate sector will help to mitigate the pandemic’s effects and to address the pre-existing longer-term issues the region faces. The future of Asia must remain agile and innovative to exit the crisis in a durable, greener, and more equitable way.



50:50 campaign may not get immediate extension

National News Bureau of Thailand





BANGKOK (NNT) – The government’s 50:50 co-pay campaign expiring on 31st March may not be getting an immediate campaign extension. The Minister of Finance says campaign evaluation is needed to improve future campaigns.

The Minister of Finance Arkhom Termpittayapaisith today announced the government may not be able to reach a conclusion on the extension of the 50:50 co-pay campaign in time for the current 31st March campaign end date, as evaluations are needed to better improve the campaign.

Originally introduced last year, the 50:50 campaign is a financial aid campaign for people impacted by the COVID-19 pandemic, in which the government subsidizes up to half the price of purchases at participating stores, with a daily cap on the subsidy amount of 150 baht, and a 3,500 baht per person subsidy limit over the entire campaign.

The campaign has already been extended once, with the current end date set for 31st March.

The Finance Minister said that payout campaigns for the general public are still valid in this period, allowing time for the 50:50 campaign to be assessed, and to address reports of fraud at some participating stores.

The Fiscal Police Office Director General and the Ministry of Finance Spokesperson Kulaya Tantitemit, said today that a bigger quota could be offered in Phase 3 of the 50:50 campaign beyond the 15 million people enrolled in the first two phases, while existing participants will need to confirm their identity if they want to participate in Phase 3, without the need to fill out the registration form.

Mrs Kulaya said the campaign will still be funded by emergency loan credit allocated for pandemic compensation, which still has about 200 billion baht available as of today.

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Customs Department Considers Measures to Help SMEs

National News Bureau of Thailand




BANGKOK (NNT) – The Customs Department is seeking ways to reduce the impact of the exemption on import tax and value-added tax (VAT) for imported goods worth up to 1,500 baht, as such measures are hurting small and medium-sized enterprises (SMEs).


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How will oil prices shape the Covid-19 recovery in emerging markets?

Oxford Business Group



How will oil prices shape the Covid-19 recovery in emerging markets?
– After falling significantly in 2020, oil prices have returned to pre-pandemic levels
– The rise has been driven by OPEC+ production cuts and an improving economic climate
– Higher prices are likely to support a rebound in oil-producing emerging markets
– Further virus outbreaks or increased production would pose challenges to price stability


A combination of continued production cuts and an increase in economic activity has prompted oil prices to return to pre-pandemic levels – a factor that will be crucial to the recovery of major oil-producing countries in the Middle East and Africa.

Brent crude prices rose above $60 a barrel in early February, the first time they had exceeded pre-Covid-19 values. They have since continued to rise, going above $66 a barrel on February 24.

The ongoing increase in oil prices, which have soared by 75% since November and around 26% since the beginning of the year, marks a dramatic change from last year.

Following the closure of many national borders and the implementation of travel-related restrictions to stop the spread of the virus, demand for oil slumped globally.

In the wake of the Saudi-Russia price war in early 2020, Brent crude prices fell from around $60 a barrel in February that year to two-decade lows of $20 a barrel in late April, as supply increased and demand plummeted. The value of WTI crude – the main benchmark for oil in the US – fell to record lows of around $40 a barrel last year on the back of a lack of storage space.

While global demand for oil remains low, one factor credited with reversing the trend is the decision to make significant cuts to oil production, which subsequently tightened global supplies.

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