Published in ASEAN News on 22.12.2020

ASEAN Economic Outlook for 2021

In recent weeks, the question of when and how quickly an economic recovery can be expected has arisen with increasing frequency. After a year dominated by the Corona pandemic, various vaccines give hope that global economic momentum can be resumed in 2021.

According to the World Bank's most pessimistic scenario, the cuts caused by the Corona pandemic will add up to USD 4.1 trillion globally, equivalent to 4.8 percent of global gross domestic product (GDP).

Asian countries have been particularly hard hit, many of them operating in the business sectors that suffered most in 2020, for example the textile and automotive supply industries.

Likewise, the abrupt decline in tourism, has hit almost all countries in Southeast Asia hard.

According to a forecast by the World Bank, economic growth in the ASEAN-10 countries will be -4.3% in 2020. In the coming year, growth of about +5.4% can be expected.

In the developing countries of Southeast Asia - which include China, South Korea and Taiwan - economic output is expected to fall by 2%, with GDP then rising again by 8.1% in 2021.
However, it is highly uncertain whether the prediction of the figures will materialize in this way.

Growth could be lower and the recovery slower than currently forecast.

If the infectious event drags on into the second half of 2021, borders remain closed, travel is difficult, and tensions in trade, technology intensify, the economic recovery could drag out for a long time.

One goal of the RCEP agreement is to boost the region's domestic economy to become less dependent on exports. Since this goal cannot be achieved within the next few years, the development of ASEAN countries is largely dependent on how quickly the global economy recovers and the extent to which they are integrated into regenerating supply chains.

As early as May 2020, most countries in the ASEAN region adopted comprehensive subsidy packages for small and medium enterprises and households. The subsidy comprised USD 318.2 billion, or 10.1% of the regional GDP.

Secretary General of ASEAN Lim Jock Hoi sees this comprehensive intervention as crucial to stabilizing the economy in the medium term. In the long run, the region should benefit from the cooperation of the regional countries.

Like the EU, the Southeast Asian countries are trying to use the Corona crisis to make their economies more environmentally friendly. Among other things, Indonesia is dismantling dozens of coal-fired power plants and there are various proposals to reduce plastic waste in the region.
At the same time, an ASEAN-wide "travel bubble" is planned for early 2021 to replace various bilateral arrangements.

All in all, Asia's economy is under pressure. Textile demand, for example, plunged 40% in Q3 2020 compared to Q3 2019, and millions of people have slipped into unemployment.

Like everywhere else in the world, the speed of regeneration depends on how quickly we can put Covid-19 behind us and how consumers react and act in 2021.

The medium-term outlook for the ASEAN region is very good. Experts see the RCEP agreement as an important tool to build extensive word chains in the region and establish future-oriented industries.