The health and economic crisis brought by the COVID-19 pandemic has afflicted more than two million people globally, with 40 percent coming from the APEC region, according to a new policy brief by the APEC Policy Support Unit.
The policy brief, entitled “APEC in the Epicentre of COVID-19,” breaks down the vast and unparalleled impact of the pandemic on the livelihoods of people and small businesses, which account for 97 percent of all firms in the region.
The APEC region’s growth is expected to decline by 2.7 percent this year, compared to the 3.6 percent growth in 2019, making it the most significant drop since the near-zero growth rate recorded in 2009 during the global financial crisis.
This reduction in growth translates to an estimated output loss of USD 2.1 trillion due to the economic fallout from the pandemic. This is compounded by an additional 23 million people becoming unemployed in 2020.
“The APEC region is on the frontlines for meeting this challenge because member economies are among the first and worst affected by the pandemic,” said APEC Secretariat Executive Director, Dr Rebecca Sta Maria. “A crisis of unprecedented severity calls for a response of unprecedented scale.”
The policy brief projects an economic rebound in 2021, with the APEC region anticipated to grow by 6.3 percent, higher than the projected global economic growth of 5.8 percent.
“As hopeful as it looks, the rebound is conditional on the effectiveness of members’ containment mechanisms to avoid a further wave of the pandemic later this year,” said APEC Policy Support Unit Director, Denis Hew.
The unprecedented shock to the global economy requires a well-targeted and coordinated regional response towards socioeconomic recovery, including greater support for healthcare systems and increased social protection.
The APEC region has an average of 4.1 hospital beds, 1.9 physicians, and 3.9 nurses or midwives per 1,000 people. While these figures have improved since the SARS outbreak in 2003, the current capacity of health systems is insufficient considering significantly higher infection rates and the uncertainty of the duration of the COVID-19 pandemic.
All 21 APEC member economies are rolling out significant and targeted fiscal measures ranging from 1 percent to 20 percent of gross domestic product to address the impact of COVID-19, including assistance for the unemployed and small and medium-sized enterprises.
“Member economies quickly rose to the challenge by introducing fiscal and monetary measures,” said Sta Maria. “The focus now is for members to come together for coordinated multilateral cooperation to support our people and small businesses.”
“Only by working together will we be better equipped to weather this pandemic and fast track our recovery.”
Regional and international organizations such as APEC have a key role to play in ensuring that members continue to exchange relevant public health information including updates on containment measures, and the development of testing kits, treatments and vaccines. Regional cooperation can likewise contribute to improving healthcare access and capacity among member economies.
The policy brief also recommends that APEC members should work to ensure an uninterrupted supply of medical goods and food. This includes eliminating trade-restrictive measures on essential goods to help with the response to the crisis and eventual recovery.
Call for Closer Policy Collaboration on Artificial Intelligence
A recent APEC Business Advisory Council (ABAC) report revealed that artificial intelligence (AI) has a role to play in mitigating both the short and long-term effects of the COVID-19 pandemic on APEC economies.
From automated health diagnostics in hospitals to smart recruitment processes in organizations, the report, titled Artificial Intelligence in APEC, finds that this technology is creating new, previously unforeseen jobs, products and services that will contribute to the post-COVID-19 economic recovery.
“As we release this report, APEC economies are facing the twin threats of a global pandemic and an economic crisis that will leave its mark on our communities for years to come,” said Dato’ Rohana Tan Sri Mahmood, Chair of the 2020 APEC Business Advisory Council.
“How APEC economies address the accelerated rise of the digital economy and leverage new technologies like AI is one of the most pressing issues of our time,” she added.
The report also examines how AI is being adopted and applied across the region and makes key recommendations calling for closer policy collaboration between business and governments.
Of the surveyed APEC economies, the report found that most already have plans, policies or programs devoted to driving or supporting AI ecosystems. In fact, the report highlights some of the AI-related innovation already underway across the region, including finding ways to help patients suffering from locked-in syndrome to communicate with the world by a team of engineers at a university in the Philippines.
Another notable innovation will benefit the farming industry. A Japanese corporation is trying to improve the efficiency of farming by automatically aggregating and analyzing sensor data and satellite images to provide farmers with farm management recommendations. In addition, a group from New Zealand developed AI-powered crocodile-spotting drones to keep swimmers safe in Australian rivers, among others.
“AI technologies have the potential to significantly impact businesses and communities across our economies,” Dato’ Rohana explained. “We believe that APEC can serve as an effective forum for member economies to collaborate on ways to maximize the benefits of AI and promote inclusive growth while ensuring its use in a responsible and ethical manner,” she added.
According to the report, recognizing this technology and all its capabilities is a central component of an economy’s forward-looking policy for growth, productivity and job creation, highlighting that the potential of AI extends beyond economic benefits and includes tools to address complex issues such as poverty, inequality, climate change, healthcare and ways to cope with effects of the pandemic.
As AI becomes more widely accepted, adopted and used for innovation, the report suggests that APEC policymakers will need to draft new policies, revise existing ones, confront new questions, address new needs and reassess its impact.
“With the cooperation of the public and private sector, a coordinated future of AI will increase the Asia-Pacific region’s competitiveness and further facilitate regional integration,” the report notes.
Artificial intelligence, already well on its way to transforming the Asia-Pacific, drives social and economic growth across all key sectors. However, the pandemic, and the ensuing focus on economic recovery, brings a renewed sense of urgency to discussions around AI usage.
Global Economic Outlook 2021: Rebound will drive growth at record speed
The global economy is projected to grow in 2021 by around 5% in market exchange rates – the fastest rate recorded in the 21st century – returning the global economy in aggregate to pre- pandemic levels of output by the end of 2021 or early 2022.
The predictions published today in PwC’s Global Economy Watch for 2021 – From the Great Lockdown to the Great Rebound – highlight key themes for 2021 linked to a wider reset for economies, skills and society.
Growth will return, but be uneven and be contingent on a successful and speedy deployment of vaccines and continued accommodative fiscal, monetary and financial conditions in the larger economies of the world. Another key theme will be how the push for recovery and growth could synchronize green infrastructure investment, creating a turning point in the fight against climate change.
Growth will return but be uneven
Despite projected expansion of 5% in market exchange rates this year, the predictions caution that the next three-to-six months will continue to be challenging, particularly for the Northern Hemisphere countries going through the winter months as they could be forced to further localised or full economy-wide lockdowns (as recently displayed in the UK).
Output in some advanced economies, for example, could contract in Q1 and growth overall is more likely to pick up in the second half of the year, when it is expected that large advanced economies will have vaccinated at least two thirds of their population.
Barret Kupelian, senior economist at PwC, said:“While it’s good news that the global economy in aggregate is likely to be back to its pre-crisis levels of output by the end of 2021 or early 2022, a distinguishing feature of the Great Rebound is that it will be uneven across different countries, sectors and income levels. For example, the Chinese economy is already bigger than its pre-pandemic size, but other advanced economies ‒‒ particularly heavily service based economies like the UK, France and Spain or those focused on exporting capital goods, such as Germany and Japan ‒‒ are unlikely to recover to their pre-crisis levels by the end of 2021.”
In economies such as the UK, France, Spain and Germany, growing but lower levels of output are projected to push up unemployment rates, with most of the jobs affected likely to be those at the bottom end of the earnings distribution, thus exacerbating income inequalities.
Barret Kupelian, senior economist at PwC, added: “Once the virus is under control, policymakers’ attention will need to focus on laying the foundations for sustainable and inclusive growth with particular focus on creating jobs and pushing the green economy agenda. Business leaders need to plan now both in terms of growth and investment, including upskilling of their existing workforce as a key aspect.”
A synchronised push for green infrastructure
The environment will be an important focus for 2021 and is already being positioned as an opportunity for accelerating the business and policy transition to net zero. Significant investment and policy shifts related to the Paris Climate Agreement are expected in 2021 in the major trading blocks including the US, China and the EU.
Green bonds, which are used to directly finance environmental projects, currently make up less than 5% of the global fixed income market. In 2021, total green bond issuance will increase by over 40% to top half a trillion US dollars for the first time. In addition, investor appetite for Environmental, Social and Governance (ESG) funds will continue to increase and could account for up to 57% of total European mutual funds by 2025.
Globally, the analysis points to electricity production from renewables continuing to gather momentum, with solar photovoltaic (PV) capacity likely to grow at rapid rates on the back of growing capacity in the EU, India and China. If current trends continue, solar PV capacity is on course to surpass natural gas in 2023 and coal in 2024 in the global electricity sector.
Global Economy to Expand by 4% in 2021
The global economy is expected to expand 4% in 2021, assuming an initial COVID-19 vaccine rollout becomes widespread throughout the year. A recovery, however, will likely be subdued, unless policy makers move decisively to tame the pandemic and implement investment-enhancing reforms, the World Bank says in its January 2021 Global Economic Prospects.
Although the global economy is growing again after a 4.3% contraction in 2020, the pandemic has caused a heavy toll of deaths and illness, plunged millions into poverty, and may depress economic activity and incomes for a prolonged period. Top near-term policy priorities are controlling the spread of COVID-19 and ensuring rapid and widespread vaccine deployment. To support economic recovery, authorities also need to facilitate a re-investment cycle aimed at sustainable growth that is less dependent on government debt.
“While the global economy appears to have entered a subdued recovery, policymakers face formidable challenges—in public health, debt management, budget policies, central banking and structural reforms—as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth,” said World Bank Group President David Malpass. “To overcome the impacts of the pandemic and counter the investment headwind, there needs to be a major push to improve business environments, increase labor and product market flexibility, and strengthen transparency and governance.”
The collapse in global economic activity in 2020 is estimated to have been slightly less severe than previously projected, mainly due to shallower contractions in advanced economies and a more robust recovery in China. In contrast, disruptions to activity in the majority of other emerging market and developing economies were more acute than expected.
“Financial fragilities in many of these countries, as the growth shock impacts vulnerable household and business balance sheets, will also need to be addressed,” Vice President and World Bank Group Chief Economist Carmen Reinhart said.
The near-term outlook remains highly uncertain, and different growth outcomes are still possible, as a section of the report details. A downside scenario in which infections continue to rise and the rollout of a vaccine is delayed could limit the global expansion to 1.6% in 2021. Meanwhile, in an upside scenario with successful pandemic control and a faster vaccination process, global growth could accelerate to nearly 5 percent.
In advanced economies, a nascent rebound stalled in the third quarter following a resurgence of infections, pointing to a slow and challenging recovery. U.S. GDP is forecast to expand 3.5% in 2021, after an estimated 3.6% contraction in 2020. In the euro area, output is anticipated to grow 3.6% this year, following a 7.4% decline in 2020. Activity in Japan, which shrank by 5.3% in the year just ended, is forecast to grow by 2.5% in 2021.
Aggregate GDP in emerging market and developing economies, including China, is expected to grow 5% in 2021, after a contraction of 2.6% in 2020. China’s economy is expected to expand by 7.9% this year following 2% growth last year. Excluding China, emerging market and developing economies are forecast to expand 3.4% in 2021 after a contraction of 5% in 2020. Among low-income economies, activity is projected to increase 3.3% in 2021, after a contraction of 0.9% in 2020.
Analytical sections of the latest Global Economic Prospects report examine how the pandemic has amplified risks around debt accumulation; how it could hold back growth over the long term absent concerted reform efforts; and what risks are associated with the use of asset purchase programs as a monetary policy tool in emerging market and developing economies.
“The pandemic has greatly exacerbated debt risks in emerging market and developing economies; weak growth prospects will likely further increase debt burdens and erode borrowers’ ability to service debt,” World Bank Acting Vice President for Equitable Growth and Financial Institutions Ayhan Kose said. “The global community needs to act rapidly and forcefully to make sure the recent debt accumulation does not end with a string of debt crises. The developing world cannot afford another lost decade.”
As severe crises did in the past, the pandemic is expected to leave long lasting adverse effects on global activity. It is likely to worsen the slowdown in global growth projected over the next decade due to underinvestment, underemployment, and labor force declines in many advanced economies. If history is any guide, the global economy is heading for a decade of growth disappointments unless policy makers put in place comprehensive reforms to improve the fundamental drivers of equitable and sustainable economic growth.
Policymakers need to continue to sustain the recovery, gradually shifting from income support to growth-enhancing policies. In the longer run, in emerging market and developing economies, policies to improve health and education services, digital infrastructure, climate resilience, and business and governance practices will help mitigate the economic damage caused by the pandemic, reduce poverty and advance shared prosperity. In the context of weak fiscal positions and elevated debt, institutional reforms to spur organic growth are particularly important. In the past, the growth dividends from reform efforts were recognized by investors in upgrades to their long-term growth expectations and increased investment flows.
Central banks in some emerging market and developing economies have employed asset purchase programs in response to pandemic-induced financial market pressures, in many cases for the first time. When targeted to market failures, these programs appear to have helped stabilize financial markets during the initial stages of the crisis. However, in economies where asset purchases continue to expand and are perceived to finance fiscal deficits, these programs may erode central bank operational independence, risk currency weakness that de-anchors inflation expectations, and increase worries about debt sustainability.
Digitalization crucial to SIDs’ COVID-19 recovery, long-term development
The upscaling of digital technologies presents a host of opportunities for small island developing states (SIDS) to diversify their economies,...
Blank Spot in EU
The historic exit of the Great Britain from the European Union sparked both opportunities and chaos alike. Whether it comes...
UN officials fear US terrorist designation will hasten famine in Yemen
Senior UN officials have expressed concern over the potential impact of the decision by the United States to designate Yemen’s...
World Bank Plans to Invest over $5 Billion in Drylands in Africa
The World Bank plans to invest over $5 billion over the next five years to help restore degraded landscapes, improve...
Looming Large: The Middle East Braces for Fallout of US–China Divide
China would like the world to believe that the Middle East and North Africa region does not rank high on...
India’s Sprouting Counterforce Posture
In recent years, the technological advancements by India in the domain of counterforce military capabilities have increased the vulnerability of...
Health experts arrive in Wuhan to investigate COVID-19 origins
Members of an international team studying the origins of the virus that causes COVID-19 arrived in Wuhan, China, on Thursday,...
Middle East3 days ago
Can Syria be reborn from the ruins after a decade of civil war?
Middle East2 days ago
Erdogan punches above his weight
Economy3 days ago
Pakistan Maritime: Shipping Policy of 2020
International Law3 days ago
Human Rights and Democracy have been causalities of the COVID 19 Pandemic
Economy3 days ago
The role of economic warfare in understanding contemporary geopolitics
Americas3 days ago
How Americans Struggle Between Nobility and Mean Reality
Diplomacy3 days ago
Corona Vaccine: A Diplomatic Tool
South Asia2 days ago
India: Metamorphosis from disinformation to stark lies