In its report titled ‘APAC Economic Outlook: The
Roadblock’, it said that social distancing is weighing on the current quarter but economic recovery will resume by the year-end.
“While its second wave, which is now coming to an end, may have more lasting damage to the economy as the pandemic’s one-two punch hit small enterprises very hard, exports will once again be the foundation for recovery,” Moody’s Analytics said.
As per the report, the Delta variant of Covid-19 is among factors now adversely affecting economies of the Asia-Pacific (APAC) region, but the economic hit from the current round of movement restrictions in the region will not be as severe as the recessions in the second quarter of last year.
In India, where exports make up relatively small shares of the economy, high commodity prices have boosted the value of exports. This is one factor that helped reinvigorate India after its first devastating wave of Covid-19, it said.
Further, it highlighted that the gains in India and the Philippines this year are skewed upward by their very deep recessions in 2020 and downside risks are “considerable for both countries in this year’s second half and into 2022”.
“Both have suffered lengthy economic shutdowns, accompanied by only modest fiscal support provided to SMEs and low-income households, that could lead to very deep and lasting scarring as they struggle to reopen businesses, pay back loans, or find employment as the economy finally recovers,” Moody’s Analytics said.
On vaccination, the company said India is struggling to accelerate its pace of inoculation.
The global economic recovery is continuing at a solid pace, but parts of Asia will not reflect this in the near term given heightened social distancing restrictions now in place, particularly in Southeast Asia as the Delta variant of Covid-19 spreads across the region, it said.
“Global trade continued its rapid recovery well into this year’s second quarter. Global industrial production also is still rising, although now at a slower pace than merchandise trade as tie-ups in global supply chains slow many manufacturing processes,” it added.
Moody’s Analytics said global GDP this year will be in the range of 5-5.5%, well above its 3% potential growth rate as recovery continues from last year”s pandemic recession.