- The overall economic losses of 15 Asian countries and regions last year amounted to about US$1.7 trillion in terms of gross domestic product
- Excluding China, the rest of Asia recorded significant negative growth in 2020, losing about $1 trillion, much larger than China’s GDP loss of $0.6 trillion
- The service sector posted about $1 trillion in loss, accounting for 60% of the total losses
- Once the infection is under control and the flow of people recovers, demand, especially in the service sector, is expected to recover to some extent, but the impact may remain in the medium term
- If teleworking takes roots, the demand structure will change, as spending in transportation will decrease, but communication costs will increase
In 2020, the year of the outbreak of the novel coronavirus, the overall economic losses of 15 Asian countries and regions amounted to about US$1.7 trillion in terms of gross domestic product (GDP), according to a new analysis from the Japan Center for Economic Research (JCER).
Countries with high growth rates during ordinary times, such as India and the ASEAN-5, were impacted the hardest, and the decline was especially severe in the service industry, including food services and tourism. The 15 major Asian countries and regions were calculated to have incurred a 5.7% loss in GDP last year because of the COVID-19 crisis.
Moreover, the effects of the crisis on the supply and demand structure may persist in the medium term, said the report released October 25 by JCER, a Tokyo-based research institute conducting macroeconomic forecasts.
While several countries witnessed a decline in GDP in 2020, Asian countries saw a slight increase of 2.2% because China—accounting for half of Asia’s GDP—succeeded in early containment of the pandemic and maintained positive growth.
Excluding China, the rest of Asia recorded significant negative growth in 2020, and its loss amounted to about $1 trillion, much larger than China’s GDP loss of $0.6 trillion, noted JCER.
The report defined economic loss as the GDP that would have been achieved if the COVID-19 crisis had not occurred minus the GDP that has actually been obtained during the COVID-19 crisis.
The 10 countries with the biggest economic losses last year included China (-$638 billion) because of its large economy, India (-$480 billion), Japan (-$162 billion), and the ASEAN countries of Indonesia (-$154 billion), Thailand (-$71 billion), Malaysia (-$44 billion), Philippines (-$43 billion) and Singapore (-$42 billion). Also on the top 10 list were South Korea (-$470 billion) and Hong Kong (-$28 billion).
Notably, Taiwan is in a positive state, its 2020 GDP surpassing the pre-pandemic forecast. Owing to the pandemic, telework and online learning have created a special demand for PCs and semiconductors, which are Taiwan’s fortes.
Another characteristic of the COVID-19 crisis is that the losses are particularly high in the service industries with human contact. The economic loss incurred by the service sector was about $1 trillion, accounting for 60% of the total losses.
In several countries there has been a noticeable decline in the GDP of “accommodation and food services” and “transportation and warehousing,” while “information and communication,” a representative of stay-at-home demand, has shown significant growth, said JCER.
A semi-annual GDP trend shows that in Asia, GDP has now recovered to the predicted pre-COVID-19 crisis level, largely due to China’s rapid recovery, while other Asian countries and regions have yet to regain their pre-pandemic growth.
In terms of sales, the service sector witnessed the largest decline. The biggest losers included casinos (-53%), airlines (-49%), railroads (-36%), hotels and resorts (-31%), department stores (-31%), and movies and entertainment (-30%).
In contrast, electronic commerce, non-ferrous metals, and semiconductors are doing well. Materials-related products, for which demand is rising because of the economic recovery in the manufacturing industry, were also strong.
The tourism industry, comprising accommodation and catering, has been particularly hard hit. For many countries in the region that depend on tourism for economic growth, such as Thailand and Cambodia, a slow recovery in tourism could stall the recovery of the overall economy.
JCER said that once the infection is under control and the flow of people recovers, demand—especially in the service sector—is expected to recover to some extent, but the impact may remain in the medium term.
If teleworking takes roots, the demand structure will change, as spending in transportation will decrease, but communication costs will increase, the institute added. Furthermore, if bankruptcies, increases in debt and loss of human capital occur in the service industry, experiencing a downtown in business conditions, a negative impact on the supply structure over the medium term is possible.
Photo by Masaaki Komori on Unsplash
