October 2010 east asia and pacific economic update

The crisis has shown that taking a dynamic view could help East Asia and Pacific EAP governments make choices today that soften trade-offs tomorrow in seven key areas:. Those countries that have contained the spread of the disease to date used a combination of stringent mobility restrictions, extensive testing-based strategies, and information programs to encourage precautionary behavior.

However, the pandemic and efforts to contain its spread led to a significant curtailment of economic activity.

The region as a whole is expected to grow by only 0. Prospects for the region are brighter in Left unremedied, these consequences of the pandemic could reduce regional growth over the next decade by 1 percentage point per year.

Governments face difficult trade-offs. Significant expenditure on relief or a consumption-supporting stimulus may leave an indebted government less-equipped to invest in infrastructure and hence growth.

And how governments distribute the burden of the public debt across individuals and over time — through indirect taxes, income and profit taxes, inflation or financial repression — will matter for both growth and distribution. The crisis has shown that taking a dynamic view could help EAP governments make choices today that soften trade-offs tomorrow in seven key areas:.

Back to top. The COVID pandemic has delivered a triple shock to the developing East Asia and Pacific region EAP : the pandemic itself, the economic impact of containment measures, and reverberations from the global recession. Country outcomes were generally related to how efficiently the disease was contained and how exposed countries were to external shocks.

Output in China contracted by 1. Containment of the disease in some countries is leading to a revival of domestic economic activity. Trade is beginning to revive as global economic activity gradually resumes, but tourism will remain subdued. Though short-term capital has returned to the region, global uncertainty still inhibits domestic and foreign investment.

The capacity of financially strained governments to stimulate the economies is also limited. While China is forecast to grow by 2. Prospects for the region are brighter in , with growth expected to be 7.

They also need to address fiscal risks and create space to support long-term growth, with measures including reducing energy subsidies. Press Release Developing East Asia slows, but continues to lead global growth at 7. Cancel No Thanks Yes, I'll provide feedback. What was the purpose of your visit to worldbank. Did the layout and navigation of the new site help you locate what you were looking for? Yes No. Do you have any other feedback on the new version of our website?

If you are willing to be contacted in the future to help us improve our website, please leave your email address below. Which of the following best describes your career field or organization? Among smaller countries, the recovery is expected to be particularly protracted in tourism-dependent Island economies, with growth expected to be negative in about half of the countries, even though they have been largely spared by the pandemic.

Drivers of good performance The better performing countries were able: To contain COVID efficiently, by transitioning early from stringent shutdowns to effective test-based strategies rather than relying on prolonged lockdowns. The roll-out of the vaccine has so far not had an appreciable impact on growth in the region.

Take advantage of the revival of trade in manufactured goods, especially electronics, and were not excessively dependent on earnings from tourism. To provide significant fiscal and monetary support because their governments had adequate policy space.

Growth-boosting U. But slow implementation of vaccination, because of the mismatch between vaccines and need and limited capacity, could retard growth by as much as 1 percentage point in some countries. Back to top Policy priorities Action to contain COVID With current stocks and allocation of vaccines, industrial countries would achieve more than 80 percent coverage, developing countries only about 55 percent by the end of At the same time, new more infectious and possibly immune resistant variants VOCs could exacerbate outcomes.

Countries, such as China and Vietnam, that are effectively pursuing COVID elimination, have space to develop a more appropriate vaccination strategy for their large populations. Since vaccination will not be sufficient to completely suppress viral transmission soon in most countries, governments must enhance other non-pharmaceutical interventions NPIs , especially testing-tracing-isolation, that would magnify the impact and cost-effectiveness of vaccines.

Support today without instability tomorrow Fiscal policy is expected to play a demanding triple-role of supporting relief, recovery and growth. In many EAP countries, relief is less than earning losses, stimulus has not fully remedied deficient demand, and public investment is not a significant part of recovery efforts.

At the same time, public debt has increased on average by 7 percent of GDP as governments committed to fiscal support equal to nearly 10 percent of GDP. Governments in the region can increase the efficiency of expenditure.

The fiscal implications of the two-pillar solution in East Asia and Pacific. COVID threatens to create a combination without recent precedent: slow growth and increasing inequality. The result could be absolute deprivation to an extent that the region has not seen in the last two decades. However, bold reforms could offset some of the adverse impact. This section focuses on the impact on firms, the key protagonists in the economy. It examines the impact on productivity, within the firm as well as the productivity impact of the reallocation of resources between firms within a sector and across sectors.

Subsequently, it explores how patterns of technology adoption will affect future productivity growth, and the role policy is playing and should play in fostering growth. This section illustrates how increased inequality today can worsen inequality tomorrow. Coping mechanisms, such as the distress sale of productive assets and increased debt, can hurt longer-term incomes. Also, food insecurity and limited access to interactive learning could lead to long-term losses in human capital and economic opportunity.

Finally, the section examines how social protection spending has stepped into the breach left by fiscal policy. Furthermore, it is affecting the political economy of policymaking by changing the distribution of economic pain and incomes.

It remains to be seen whether these political changes contribute to the policy reform that is needed to both remedy the scars and exploit the opportunities. This last section of the report provides some recommendations in light of the reforms discussed earlier. Box II.