Output in China has already bounced back higher than pre-pandemic levels
The developing economies of East Asia and the Pacific (EAP) are facing an uneven recovery from the Covid-19 pandemic – with China and Vietnam the only countries seeing a V-shaped rebound where output has already surpassed pre-pandemic levels.
According to the World Bank’s latest economic update for the region, output in the other major economies has remained on average around 5% below pre-pandemic levels, with the smallest gap in Indonesia (2.2%) and the largest gap in the Philippines (8.4%).
Economic performance has depended on the effectiveness of virus containment, the ability to take advantage of the revival of international trade, and the capacity of governments to provide fiscal and monetary support.
The economic shock caused by the pandemic has also stalled poverty reduction in the region, which stopped declining in 2020 for the first time in decades. An estimated 32m people failed to escape poverty (at a poverty line of $5.50/ day) due to the pandemic, the World Bank says.
Inequality also increased, driven by the pandemic and resulting shutdowns, as well as unequal access to social services and digital technologies.
In some countries, children in the poorest two-fifths of households were 20% less likely to be engaged in learning than children of the top one-fifth. Women are suffering more violence than previously: 25% of respondents in Lao PDR and 83% in Indonesia said that domestic violence worsened due to Covid-19.
Growth in the region is expected to accelerate from an estimated 1.2% in 2020 to 7.5% in 2021.
But there is likely to be a three-speed recovery. China and Vietnam are expected to grow even more strongly in 2021 – by 8.1% and 6.6% respectively – up from 2.3% and 2.9% in 2020. Other large economies, more scarred by the crisis, will grow about 4.6% on average, slightly slower than pre-crisis growth. Recovery is expected to be particularly protracted in tourism-dependent island economies.
The report estimates that US stimulus could add 1 percentage point on average to the growth of countries in the region in 2021 and advance recovery by about three months on average.
Risks to the outlook come from slow implementation of Covid-19 vaccines, which could slow growth by as much as 1 percentage point in some countries.
The report calls for action to contain the disease, support the economy, and green the recovery. It warns that with current stocks and allocation of vaccines, industrial countries would achieve more than 80% population coverage by the end of 2021, while developing countries will achieve only about 55% coverage.
“China can play a vital role, by exporting more medical products, boosting its consumption, and taking stronger climate action. And it too would benefit from a safer world and more balanced growth,” says Aaditya Mattoo, chief economist for East Asia and the Pacific at the World Bank.
The report also urges international cooperation in the production and approval of vaccines as well as in allocation based on need, to help contain Covid-19.