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Asian Economy: Overview, Growth & Development

‘Philippine economy to shrink 8pc in 2020

The Philippine economy is projected to contract by 8 percent this year as a prolonged community quarantine and inadequate fiscal support would likely delay its recovery.

In a report on Thursday, London-based research consultancy firm Capital Economics said the new forecast was a further reduction from its earlier -6 percent forecast.

Capital Economics’ latest projection is worse than the -3.6 percent forecast of the International Monetary Fund, the -3.8 percent of the Asian Development Bank and the –1.9 percent of the World Bank.

The figure is also a reversal of the 6 percent economic growth last year.

“The Philippines is likely to be one of the hardest-hit countries in the region by the pandemic,” said Capital Economics referring to the coronavirus disease 2019.

“The lockdown in the Philippines has lasted longer and been more severe than in most of the region. It started in mid-March and has been extended in some areas, including Manila, to the present. Despite this, there are few signs that the virus is being brought under control. Failure to contain the virus means that people will be slow to resume their normal lives,” it added.

Capital Economics noted the long imposition of the lockdown will likely leave a substantial lasting damage to the labor market and household balance sheets.

“Recent data show a huge surge in unemployment and inactivity. Many households are likely to have already burnt through their savings and seen their debt burdens grow. This will weigh on demand long after restrictions are fully lifted,” the report said.

Russia’s economy contracted 4.2pc in h1 2020

Russia’s gross domestic product (GDP) declined 4.2 percent in the first half of 2020, Economy Minister Maxim Reshetnikov was quoted as saying by the Interfax news agency on Wednesday.

Reshetnikov said his ministry was maintaining its full-year forecast of a decline in GDP of 4.8 percent in 2020, but that it would revise this forecast in August.

The announcement comes at a time when Russia reported 5,862 new cases of the novel coronavirus on Wednesday, pushing its total infection tally to 789,190, the fourth largest in the world.

The country’s coronavirus crisis response centre said 165 people had died in the last 24 hours, bringing the official death toll to 12,745.

Russia has dropped its target of becoming one of the world’s five largest economies in a sweeping reset of its ambitious national development goals, the Moscow Times reported on Wednesday.

The goal was outlined by President Vladimir Putin following his reelection in 2018, but has been left out of Russia’s new social and economic targets announced on Tuesday.

Putin also delayed a number of other goals to 2030 from the original 2024 deadline, including halving Russia’s poverty rate and boosting life expectancy to 78.

Kremlin spokesman Dmitry Peskov said “highly, highly unfavorable” global economic conditions were behind Russia dropping the goal to become one of the world’s top 5 economies.

Measured in terms of purchasing power parity (PPP) — an indicator which accounts for differences in living standards — Russia was the sixth largest economy in the world in 2019, the World Bank estimates. In nominal terms, Russia ranks eleventh.

Russia’s economy is expected to recover from the coronavirus pandemic slower than most other countries, a host of economic forecasts predict.

Peskov told journalists that goals on raising life expectancy and reducing poverty had been pushed back due to the unfavourable world economic conditions that will slow the development of all countries without exception. 18 million Russians currently live below the poverty line. Life expectancy has grown in recent years from extremely low levels in the early post-Soviet years, especially among men. In 2019, it was 67 for men and 77 for women. This year Russia has seen its economy, dependent on exports of hydrocarbons, hit by a collapse in oil prices as well as the coronavirus pandemic.

Factory activity contracts for 15th straight month in Japan

Japan’s factory activity contracted for a 15th straight month in July, indicating the economic pain from the coronavirus crisis has extended into the third quarter of the year as hopes for a quick global recovery fade.

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 42.6 from a final 40.1 last month, as broader conditions remained fragile though the pace of decline was the slowest in four months.

“The Japanese economy continued to struggle at the start of the third quarter,” said Mr Joe Hayes, economist at IHS Markit, which compiles the survey. “While the easing of emergency measures provided some relief, especially to the domestic sector, Japan’s growth continued to be adversely affected by subdued global trade flows and restrictions on travel.”

The PMI survey, released yesterday, showed that the manufacturing index stayed below the 50.0 threshold that separates contraction from expansion for a 15th month, with overall output, new orders and employment all in decline again.

Japan’s economy is forecast to shrink 5.3 percent this fiscal year, the largest contraction since comparable data became available in 1994, followed by a 3.3 percent bounce next year, according to a Reuters poll of over 30 economists.

June exports plunged at a double-digit pace for the fourth straight month, data showed on Monday, backing signs that a slump in global demand for durable goods since March due to the pandemic has thrown the economy into a deep recession.

The PMI survey also showed weakness in service sector activity, which saw outstanding business, business expectations and employment conditions contract.

The au Jibun Bank Flash Services PMI remained largely flat at 45.2 on a seasonally adjusted basis, compared with June’s final figure of 45.0.

The composite PMI, which includes both manufacturing and services, stood at a five-month high of 43.9 this month, up from last month’s final figure of 40.8.

 

Bangladeshi migrants in Italy stigmatized over coronavirus certificate scam

In the aftermath of a coronavirus testing scandal in Dhaka, Bangladeshis living in Rome have reported a change in attitude towards their community. Some say they have become stigmatized as “viral bombs.”

Rakib Hasan, 25, has lived in Rome for several years and calls Italy home. Standing in a queue in front of a Roman hospital, Hasan tells DW how Bangladesh’s fake negative coronavirus certificates scandal has complicated matters for many Bangladeshi migrants in Italy, including himself.

“I haven’t visited Bangladesh recently. However, the owner of the restaurant where I work in Rome asked me to get tested for the coronavirus. It’s compulsory now,” said Hasan, adding that he feels ashamed of the recent scam that has cast a shadow over the Bangladeshi community in the Mediterranean country.

Mohammad Shahed, a Bangladeshi hospital owner and a member of the ruling Awami League party, was accused of issuing thousands of fake negative COVID-19 test results to patients at his two clinics in exchange for money. Last Wednesday, he was arrested while trying to flee to India disguised in a burqa.

Shahed, along with a dozen others, was detained by authorities in connection with the scam. Shahed’s hospitals allegedly carried out 10,500 COVID-19 tests, out of which 4,200 were legitimate and the remaining 6,300 test reports were given without even conducting tests.

Dhaka police Commissioner Abdul Baten said Shahed admitted after his arrest that his clinics did not possess the proper equipment to conduct coronavirus tests.

Some of Shahed’s patients then returned to Europe with the fraudulent certificates, only to be tested positive with the virus upon arrival in Rome.

On July 6, Italian authorities found 21 of 225 passengers on a flight from Dhaka to have the coronavirus. More passengers later tested positive, bringing the figure to 48. Some of them possessed certificates for a negative COVID-19 test from Dhaka, according to media reports.

Italian authorities later denied entry to another flight from Bangladesh and imposed an entry ban on non-Schengen countries, including Bangladesh, until July 31.

Indian economy: green shoots point toward an uptick

The Covid-19 pandemic has brought in a “new normal” and largely changed the economic landscape and business environment. As per (KPMG, 2020), the pandemic will change the scenario across the world with cash being the king, business organisations leaning towards variable cost models, supply chains being made more resilient with the call being “Vocal for Local”, policymakers being agile and re-strategising and redesigning various policies.

Economic activity and market sentiments saw an uptick with the opening of the economy in Unlock 1.0. As per CMIE (Centre for Monitoring Indian Economy), the worst seems to be over for the Indian economy and the unemployment rate (30 days moving average) is settling at 8.4 percent as of July 15, 2020, a tad higher than pre-COVID levels as against 27.1 percent in May 2020 (due to supply chain disruptions and massive job losses). Rural employment numbers are leading the economic recovery for India with a 7.3 percent unemployment rate as against the urban unemployment rate of 10.8 percent for mid-July 2020. The reasons that can be ascribed to better employment numbers in the rural sector are a better than normal monsoon, availability of water in reservoirs for irrigation, aggressive implementation of the MGNREGA scheme by the Government and enhanced sowing activities. As per estimates, the Indian agricultural sector is expected to grow at 3 percent despite lockdown.

The Ministry of Finance has announced that the Goods and Services Tax collected in June 2020 was Rs. 90,917 crore (90 percent of the revenues in the same month last year). The collections in April and May 2020 during the period of lockdown was relatively lesser and stood at Rs. 32,294 crore and Rs. 62,009 crore respectively.

Interestingly the collections in June 2020 are closer to those in the month of January 2020 which was at Rs. 1,10,828 crore. These revenue numbers are indicative of the fact that a revival is underway and collections will only improve in the near future with production levels increasing. These are all signs of green shoots of recovery happening in the economy.

World Bank warns of 2pc contraction in Indonesia’s economy this year

The World Bank has warned that the Indonesian economy might contract 2 percent this year if mobility restrictions are further implemented to contain the spread of COVID-19.

“Under somewhat harsher assumptions on the global economy of a deeper contraction, and if there is a need for mobility restrictions to be reinstated going forward, we do think that the economy could actually contract by 2 percent in 2020,” World Bank Indonesia lead economist Frederico Gil Sander said during the virtual launch of World Bank’s Indonesia Economic Prospect report on Thursday.

The coronavirus outbreak in Indonesia has not shown any signs of abating as more than 1,000 new cases have been recorded daily since June. Infections stood at 81,600 as of Thursday afternoon with 3,800 deaths, official data show.

Despite the rising number of cases, the government and regional administrations relaxed social restrictions amid concerns of a slumping economy.

The government projects the country’s economy to grow by 1 percent this year under the baseline scenario or contract by 4 percent under the worst case scenario as the pandemic batters business activity and hits demand. The economy grew 2.97 percent in the first quarter, the lowest in 19 years.

How strong are Britain and China’s economic ties?

The economic relationship between the UK and China has grown significantly over the past two decades. In 1999, China was the UK’s 26th biggest export market. It now sits in sixth place. Trade between the two countries hit a record high last year, with large infrastructure projects and education playing major roles. But as tensions rise between London and Beijing – following the UK government’s U-turn on using Huawei telecoms 5G equipment in the country’s networks – the ties that have benefited both nations may now be under threat.

Last year, China was the UK’s sixth largest export market, worth £30.7bn, according to the Office for National Statistics (ONS). This was a record high, up from £23.4bn in 2018, and the fourth year-on-year increase in a row. In the other direction, China was the UK’s fourth largest source of imports, worth £49bn, also a record high. Leslie Young, Professor of Economics at the Cheung Kong Graduate School of Business in Beijing, told that in his view trade between the two countries would not be a victim of increased London-Beijing tensions. “The rising hostility between the UK and China is unlikely to have a strong effect on the leading components of their trade. The major effect is likely to be on UK higher education and the role of the UK as a hub for Chinese companies.” China also plays an increasingly important role in the UK’s infrastructure, including its nuclear power capabilities. China General Nuclear Power (CGN) is partly financing the building of the £20bn Hinkley Point nuclear power station in Somerset.

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