APAC losses could rise to $2.85t, growth down to 0.3%

Economies expected to enter a complicated transition from lockdown.

Containing the COVID-19 pandemic will cost Asia Pacific at least $2.85t (US$2t) in lost household and corporate incomes through 2021, according to S&P Global Ratings. The economic cost of an initial one-month lockdown is calculated to be about 3% of GDP in Asia-Pacific.

Asia-Pacific growth is now down to 0.3% for 2020 from 4.8% before the pandemic. China’s growth slid to 1.2% from 2.9%, India’s is down to 1.8% from 3.5%, and Japan now sees a 3.6% contraction from -1.2%, previously.

Economies are expected to enter a transition period where social-distancing measures will be along a continuum between full lockdowns and business-as-usual until mid-2021. Economic policies could limit some of the damage during the first-wave containment, support the partial recovery, and provide a bridge to the self-sustaining recovery.

However, risks still appear skewed to the downside as costs continue to compound and different social--distancing constraints complicate matters, with each country's position shifting randomly as second and third waves of infections rise and fall.

In addition, enduring unemployment would cascade to the broader economy as consumption lowers, savings become higher, and stress may emerge amongst some of the region's household sectors.

On a positive note, the substantial tightening in US dollar financing conditions provides greater policy space for emerging markets and reduces the potential of triggering a balance of payments instability.