How bad is COVID-19's impact on Asian developing economies?

In its April World Economic Outlook, the International Monetary Fund (IMF) predicts a baseline case of negative 3 percent global ‘growth’ in 2020, rebounding to 5.8 percent in 2021. But it warns that things could get a lot worse.

- DAVID DAPICE

Any economic forecast depends on how quickly the virus spreads, how deadly it is, how effective social isolation and distancing are, and if treatments, herd immunity or vaccines render it less destructive. We are still at an early stage of understanding these variables. There are hopes for a treatment this year and a vaccine next year, which would limit the time of economic shutdowns.

The impact in Asia depends on the length and severity of control measures. China and Vietnam are slowly letting up while Singapore is tightening. Indonesia is prevaricating. Malaysia, Thailand, and perhaps the Philippines and India may loosen controls in May.

The economic response in rich nations has been astonishingly large. The United States added trillions of dollars to a deficit that before the virus stood at US $ 1 trillion. The Congressional Budget Office forecasts a deficit of US $ 3.7 trillion this fiscal year, nearly a fifth of GDP. The Federal Reserve (the Fed), EU Central Bank, and Bank of Japan are all going into overdrive, creating trillions of dollars, euros, and yen by buying debt or lending to banks. The Fed is going further than the quantitative easing implemented a decade ago, even buying junk bonds to stabilise markets.

What are the implications for Asian developing countries and their economic management?