JAKARTA, INDONESIA — Countries around the world are busy buying COVID-19 vaccines, giving rise to the hope that the pandemic will end and that the economy will recover in the aftermath of the global health crisis that has infected over 17 million people and dented many business sectors.
The International Monetary Fund (IMF) last June predicted that the global economy would lose US$12 trillion due to the pandemic.
The World Bank (WB) estimated that the economy of East Asia and the Pacific region would only grow 0.9 per cent — the lowest since 1967.
Several factors can determine the economic recovery
While it is too early to tell what economic growth would look like in 2021, access to vaccination can be one of the indicators that can determine the economic recovery.
“One of the key factors that can determine whether a country can get out of recession is vaccination. We will see which Asian countries will give free COVID-19 vaccination,” said Rusli Abdullah, an economist at The Institute for Development of Economics and Finance (INDEF).
Noting that President Joko Widodo had recently announced that the COVID-19 vaccination would be free, Rusli told TOC: “We don’t know how successful this vaccination will be.”
He added that another factor is whether there will be a second wave due to the virus’ mutation.
The next factor, said Rusli, is whether a country can use post-pandemic opportunities.
Singapore aims to offer vaccines’ distribution service to Asian countries, due to the country’s capacity as a hub for air connectivity that helps to store and transport vaccines in the required ultra-cold temperatures.
Furthermore, the pandemic raises interest and awareness in natural products, creating a significant opportunity for Indonesia to develop its herbal pharmacy, Rusli said.
“Indonesia is rich in such resources. We can see Thailand can boost its pharmacy industry potential by maximizing its herbal potential, so why can’t we? It is a big opportunity,” he opined.
A McKinsey & Co. study stated that three indicators can determine the economic recovery in Southeast Asia: A decline in real GDP, GDP growth projection, and how long the economy will recover as it used to be.
Can lockdowns help the economy recover faster?
Many countries have imposed or currently impose strict lockdowns to curb the spread of the virus.
Despite issues and criticisms regarding such a move, lockdowns may lead to a boost in the economy in the long run.
Citing the case of China, the country recorded a 4.9 per cent growth in the third quarter when most countries are on the brink of a recession.
“Stricter lockdowns deepen the immediate negative effect, but if it is effective, it can be beneficial in the long run,” Aleksandar Tomic, Associate Dean for Strategy, Innovation and Technology at Boston College, told TOC.
Rusli raised concerns over the spike in the numbers of new cases in Indonesia, as the country has yet to enter the second wave.
He opined that 2021 would be a crucial year that will determine whether a country could successfully exit a recession.
“Despite COVID-19 cases reaching over 5,000-6,000 daily, economic activities appear to be carried out as normal, as if nothing had happened.
“What I am worried about is when the numbers of daily cases continue to rise, then strict social restrictions are imposed again. (Then) economic growth will drastically plunge,” Rusli stressed.