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Asian Economy: Overview, Growth & Development

Pandemic forces Indonesia’s economy into recession for 1st time in 20 years

Indonesia’s economy has fallen into recession for the first time since the Asian financial crisis more than two decades ago as the country struggles to control the coronavirus pandemic.

Statistics Indonesia, the central statistics agency, said Thursday that Southeast Asia’s largest economy contracted at a 3.49 percent annual pace in July-September, the second consecutive quarterly contraction.

The economy shrank at a 5.32 percent pace in the previous quarter and grew 2.9 percent in January-March, its slowest rate in almost two decades.

Indonesia has reported nearly 422,000 confirmed cases of COVID-19, the largest in Southeast Asia and second in Asia only to India’s 8.3 million confirmed cases.

Air and train travel plunged as the pandemic prompted authorities to suspend nonessential services and close many offices to stem the spread of infections, said Suhariyanto, the agency head. He uses a single name.

Suhariyanto told a news conference in the capital, Jakarta, that the logistics and hospitality sectors also fell sharply as people stayed home and dined in.

A technical recession is defined as two straight quarters of contraction. Much of the region is in recession, with air travel nearly paralyzed due to border controls and other restrictions. Indonesia’s last recession was in 1997. It helped to hasten the ouster of dictator Suharto a year later.

Post-virus economy may worsen inequality in Thailand

A top official has identified inequality as a prime concern after Thailand’s economic recovery from the coronavirus pandemic, local media reported on Wednesday.

The economy is not likely to regain all lost momentum for another two years and there are indicators that the recovery may come at a cost, Sethaput Suthiwart-Narueput, governor of Bank of Thailand, said in a meeting with editors.

He said the assumptions around the impact of COVID-19 have changed, leading to the need for new measures and policy implementations to curb the country’s economic despair, Bangkok Post reported.

Initial assessments were that the pandemic’s impact would be severe but would not not last long, leading to measures that focused on blanket initiatives, including cash injections and freezing debt repayments, the report said.

However, there is now a general consensus that the coronavirus pandemic will have a long-term impact, it added.

“It is expected to take at least two years before the Thai economy returns to its pre-pandemic levels in terms of GDP,” Sethaput was quoted as saying.

As a result, he said, there has been a change in measures to handle the situation, with a more selective approach taken that focuses on debt restructuring.

“Even when the economy is fully recovered, things are unlikely to be the same. There is a risk that more inequality in the country will be seen,” the central bank chief warned.

The pandemic has hit Thailand’s domestic businesses quite hard, particularly the tourism sector and medium-sized enterprises, resulting in high unemployment and increased household debts.

Sethaput said between 8 million to 9 million foreign visitors are expected in Thailand in 2021, a sharp drop from last year’s 40 million.

Chamber of commerce and Russia’s economic operations with African countries

Largely dictated by the results of the first Russia-Africa summit and the persistent economic sanctions by the United States and European Union, Russia is seriously reorganizing towards increasing its economic prints in Africa. Russia is, indeed, putting its house in order, identifying strategies and drawing roadmaps, and most importantly restructuring.

Quite recently, the Ministry of Foreign Affairs created the Secretariat for Russia-Africa Forum. The Secretariat further established an Association for Economic Cooperation with African States. Now Russian Chamber of Commerce and Industry has restructured the Coordinating Committee for Economic Cooperation with African States that was established as far back in 2009.

According to historical documents, the Coordinating Committee for Economic Cooperation with African States was created on the initiative of the Chamber of Commerce and Industry of the Russian Federation and Vnesheconombank with the support of the Federation Council and the State Duma of the Federal Assembly of the Russian Federation. It has had support from the Ministry of Foreign Affairs, the Ministry of Economy and Trade, the Ministry of Natural Resources, as well as the Ministry of Higher Education and Science.

XI plays down concerns that China’s economy is turning inward

Chinese President Xi Jinping tried to reassure international businesses that the nation is committed to open trade, amid concerns that the new ‘dual circulation’ strategy will mean the world’s second-largest economy is set to become more insular.

China’s new development structure is “definitely not a closed domestic circulation, but a more open dual circulation between overseas and domestic markets,” Xi said at the opening of the China International Import Expo on Wednesday in Shanghai. The strategy won’t only address China’s own demand for growth, “but will also bring benefits to all countries around the world.”

Xi speech was closely watched, given the backdrop of the U.S. election result and the shock withdrawal of what would’ve been the world’s biggest stock-market debut, the listing of financial technology giant Ant Group Co. in Shanghai and Hong Kong.

He didn’t mention either of those events, sticking instead to broad commitments to economic opening at a time when Beijing’s growth model faces increasing challenges from the U.S. The trade expo comes less than a week after the ruling Communist Party laid out development blueprints stretching until 2035 that stressed the importance of self-reliance in technology and boosting the domestic market.

Xi’s speech on Wednesday evening in Asia took place hours after polls closed in the U.S. With relations with Washington continuing to worsen this year due to the pandemic and other factors, Xi delivered a veiled swipe at the U.S.

“Covid-19 is a stark reminder that all countries are in a community with a shared future. No one can stay immune in a major crisis,” he said. “We need to join hands rather than throw punches at each other. And we need to consult rather than slander each other, bearing in mind the common interest that binds us all.”

Xi has previously used the trade expo to reiterate China’s commitment to economic openness and the global trading order. During the first event in 2018, Xi announced a plan to set up a Nasdaq-style stock board in Shanghai, in an apparent bid to encourage internal innovation and reduce reliance on U.S. technology. The Star board has since emerged as the main listing venue for China’s leading tech companies, with Ant scheduled to make its debut there this week before the IPO was pulled.

India’s economy worst-hit among emerging markets

Among the emerging nations, India seems to be the worst affected by the Covid-19 pandemic as the strength of the economy has deteriorated the most in India in the first half of 2020, finds a study.

The Investors’ Macro Ratings Index, which looks at investors’ perception of the economy based on parameters like real GDP growth, inflation, fiscal deficit and bank credit, has deteriorated in all the emerging economies, as per a report by Motilal Oswal Financial Services. However, India was the most affected in the first half and Taiwan was the least affected. The study examined macro-economic parameters in emerging economies like India, Brazil, China, Indonesia, South Korea, Malaysia, Russia, South Africa, Taiwan and Thailand.

As per IMF’s projection, India’s real GDP growth is expected to contract 10.3 percent in 2020, which is the highest contraction among the 10 emerging markets. India is also the only economy with a double-digit contraction. On the other hand, China is expected to see 1.9 percent growth, the highest among all of them.

At 4.9 percent retail inflation in 2020 will be the highest in India. Inflation has eased in most of the emerging economies, except India. Average inflation during the nine-month period of 2020 has more-than-doubled in India, while in most of the emerging nations it was lower than the same period in 2019.

At 7.2 percent, the fiscal deficit too is high, but not the highest. China, Brazil and Russia have higher fiscal deficits than India. Macro-Vulnerability Index, which calculates macro risk based on inflation, fiscal deficit and current account deficit, also is not favourable for India.

While India along with Brazil has the highest government debt, private non-financial sectors’ leverage is among the lowest. India’s government debt stands at 72.2 percent of the GDP and private non-financial debt is at 57.8, indicating lower levels of leverage.

India has also seen one of the lowest credit growth. While India’s central bank has seen the highest expansion of its balance sheet, a similar growth is not visible in money supply.

The data till August also shows that India is one among the emerging countries which saw a higher decline in merchandise exports. Till August, India’s merchandise exports had declined 18.3 percent, only lesser than Russia with a contraction of 24.4 percent. While Taiwan saw a growth of 2.4 percent, China had a marginal decline of 0.8 percent.

Neglect of migrant workers could hurt Malaysia’s economic recovery

Researchers say Malaysia has done little to protect low-wage migrant workers from the effects of the coronavirus pandemic — which could hurt an economy that’s struggling to recover.

Low-wage and low-skilled migrant workers around the world have been among the most vulnerable as businesses cut wages and jobs to cope with the pandemic’s economic shock. Their predicament often is exacerbated by a lack of assistance from their host countries, as governments prioritize help for their own citizens.

In Malaysia, thousands of migrant workers have reportedly lost their jobs. The International Labor Organization, the United Nations’ labor agency, said in a report that there were cases of migrant workers being unfairly terminated or not getting paid when Malaysia’s nationwide coronavirus lockdown was first imposed in March.

Meanwhile, more than 1,000 undocumented or illegal migrants — who often seek work with unregistered businesses — were arrested in May when authorities conducted raids during the lockdown, Reuters reported. Those workers were placed in overcrowded detention centers that later became hotspots for the spread of Covid-19, according to local media reports.

The Malaysian government has provided limited help to the workers, with a senior minister arguing in April that the workers are the responsibility of their respective embassies, according to Jarud Romadan, a researcher at Khazanah Research Institute. The not-for-profit institute is sponsored by Malaysia’s sovereign wealth fund, Khazanah Nasional.

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