The global economy will contract 5.2% in 2020, the deepest global recession in 80 years, despite for unprecedented political support. This will worsen if the pandemic takes longer to control. The good news is that the global economy is projected to grow by 4.2% in 2021. However, given the current uncertainty, this baseline forecast is subject to a recovery from mid-2020 as economies reopen.
Major implications for ASEAN
- Economic conditions deteriorated from March to May due to national locks and global negative side effects
- Sharp tightening of global funding conditions has triggered sudden capital outflows, skyrocketing regional interest rates and adjustments to local currencies
- Closing factories and interrupting production of intermediate resources negatively impact supply chains.
- Containment efforts have resulted in reduced flows of consumption, investment, production and trade, resulting in a sharp drop in activity following the Asian financial crisis.
- The outbreak appears to have died down in Malaysia and Vietnam, but has yet to peak in the Philippines and in Indonesia
- All major economies in ASEAN have provided strong macroeconomic policy support to cushion the impact
- Malaysia and Thailand have implemented emergency economic support packages equivalent to approximately 17% and 13% of GDP
- Indonesia and the Philippines have announced significant fiscal stimulus packages amounting to around 3-5% of GDP