A new updated report from the APEC Policy Support Unit finds that the COVID-19 pandemic is causing a deeper contraction to the region’s economy. The APEC region’s economic growth is now expected to decline by 3.7 percent in 2020, down from its initial forecast of a 2.7 percent contraction in April, bringing the total output loss to a staggering USD 2.9 trillion.
These new projections are in line with the revisions by the International Monetary Fund in its recently updated World Economic Outlook. Global growth is projected to fall to – 4.9 percent, compared to a decline of -3 percent estimated earlier by the IMF.
“The protracted duration of the pandemic has caused worse than anticipated impacts on the global economy, with some economies recently reporting a second wave of infection cases” said Dr Denis Hew, Director of the APEC Policy Support Unit.
Dr Hew added that economic recovery is in the horizon but it is “highly dependent on the availability of vaccines and treatments as well as the effectiveness of economic policies that are being implemented by economies to address the pandemic”.
The updated report projects an economic recovery for the region of 5.7 percent in 2021, compared to the earlier estimate of 6.3 percent. This economic rebound hinges on whether the pandemic can be contained over the second half of this year.
The APEC region’s growth declined by 2.2 percent in the first quarter of this year due to travel restrictions and widespread lockdown measures that depressed domestic consumption, trade and investment activities.
Merchandise trade recorded a bigger contraction in the first quarter from the combined impact of trade tensions and supply chain disruptions. “In overall terms, merchandise trade in APEC has significantly decreased in both value and volume this year,” explained Rhea C. Hernando, APEC Policy Unit’s researcher who wrote the updated report. “The temporary restrictions imposed on food and medical supplies weakened trade even further in the first quarter of the year.”
The region’s value of trade in goods dropped by 5.8 percent for exports and 4.1 percent for imports.
Foreign direct investment shares similar sentiment with inflows to the APEC region going down by 3.1 percent, while greenfield investments dropped sharply by 20.4 percent in 2019.
In the midst of uncertainties, the report recommends APEC economies to take decisive actions including intensifying efforts towards containment measures to avoid further waves of the pandemic, while at the same time maintaining fiscal and monetary stimulus measures to help alleviate the risk of people falling into poverty and businesses going bankrupt.
The report also urged member economies to invest in digital technology, including building or boosting technological infrastructure, equipping workers with digital skills and modernizing business and governance processes. This investment could contribute to making economies more innovative and dynamic while expanding access and opportunities to everyone.