We can’t rely on central banks again for monetary support, so the only option left is for fiscal policies to get a hold of the economy in Southeast Asia, the place where the ever contagious Covid-19 Delta Variant is rapidly spreading its infection throughout the region, based on Moody’s Analytics.
The research house advised that the central banks aren’t capable to provide the answers for the struggling Southeast Asian economies as they did in the first half of 2020 last year.
“Malaysia, for example, has introduced four significant fiscal stimulus packages this year and may increase its debt ceiling further as severe movement restrictions in Kuala Lumpur bite.
“Indonesia will have a significantly larger budget deficit than initially planned this year, with further government support flowing to mitigate movement restrictions in Bali and Java.
“The Phillippines will likely introduce a further US$3.6 billion (about RM15.22 billion) stimulus package shortly to keep the government’s downwardly-revised gross domestic product (GDP) [growth] target for 2021 insight of between 6% and 7% this year. Even if this latest package is forthcoming in the Philippines, we maintain that our existing GDP forecast for 2021 of 4.9% has down[side] risk,” it added.
Moody’s Analytic took note of the current situation in Asia in general and suggested that the low vaccination rates have proven to be the problem in speeding up its economic recovery.
“Asia’s generally slow rate of vaccination is a thorn in the region’s economic recovery. Experience in the US and UK proves that when there is a high rate of full vaccination, there is a marked improvement in health outcomes from Covid-19 contraction, irrespective of the [Delta] variant,” it said.
It added that Asia’s average rate of inoculation of its population was on the low, hence the need for lockdowns and other restrictions to avoid a further spread of the virus.
“Vietnam is a useful case in point. Vietnam was Southeast Asia’s Covid-19 success story last year with its rapid introduction of containment measures and aggressive contact tracing.
“However, the country started to see a rise in cases in late April. Like Taiwan, the country did not apply any urgency in securing vaccine supplies when the pandemic was well controlled.
“Now, it has the lowest vaccination rate in Southeast Asia. In dealing with the latest coronavirus wave, the government avoided imposing a nationwide lockdown. The daily caseload surged to one of the highest in the region, causing a significant plunge in commuting, retail and recreation activities,” it added.
Moody’s Analytics noted that herd immunity, with around 70% of the population fully inoculated, must be achieved in order to avoid another full lockdown again.
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Source : TheEdgeMarkets