An almost empty departure lounge at Bangkok’s Suvarnabhumi Airport in Thailand as passenger numbers plummeted due to the Covid-19 pandemic.
Mladen Antonov | AFP | Getty Images
Some economies in Southeast Asia have been more successful in containing the coronavirus outbreak, but global uncertainties would keep a lid on the extent of the economic recovery in the region, according to an economist from Japan̵
“Overall for the region … it’s a bit of a U-shaped recovery at best, I’d say, because it’s still full of uncertainties and I think the risks are still skewed to the downside,” Euben Paracuelles, chief economist Asean of Nomura, he told CNBC’s “Street Signs Asia” Wednesday.
A U-shaped recovery typically means that an economy spends more time at the bottom of a recession before it gradually recovers.
He explained that even though Thailand appears to successfully contain its outbreak, the economy will still suffer “a major drag” due to the collapse in tourism. The tourism hit is likely to continue until border controls are relaxed or a vaccine is available, which would allow people to travel again, he added.
A report released last month by the United Nations Conference on Trade and Development pointed to Thailand as one of the countries that could suffer the biggest economic blow from the loss of tourism. In the most optimistic scenario, Thailand would lose 9%, or about $ 47.7 billion, of gross domestic product, according to the report.
Before the coronavirus pandemic, “Thailand’s only major economic engine was really tourism and related sectors,” Paracuelles noted. “If you take it away, there really isn’t much that will revive the economy.”
Meanwhile, Singapore has been easing partial lockdown measures for over a month, but a renewed coronavirus outbreak globally could threaten the country’s foreign demand for goods and services, the economist said.
Singapore’s economy depends on external demand given its small domestic market.
Countries still struggling with the epidemic
Indonesia and the Philippines – the two most populous countries in Southeast Asia – are still struggling to control the spread of coronavirus disease or Covid-19 locally.
Both economies have suffered. Indonesia reported its first economic contraction in over two decades on Wednesday after second-quarter GDP shrank 5.3% from a year ago, while the Philippines on Thursday recorded a 16.5% contraction on annual basis, the deepest ever recorded.
The Philippines also tightened the blockade of the capital Manila and neighboring provinces this week, a move that would have further affected economic activity, Paracuelles said.
The economist said both governments face greater urgency in supporting their respective economies.
He noted that the Philippine government has not spent as much as some countries in the region to revive the economy.
“If it doesn’t happen urgently enough, I’m afraid it will lead to further concern, business uncertainty will remain high and thus hamper any recovery,” he said.
For Indonesia, Paracuelles said the longer it takes authorities to control the outbreak, the harder it will be for any stimulus measures to undo the blow to the economy.