Covid’s resurgence in Japan, South Korea could hit Asia’s economic recovery

SINGAPORE – With 2020 drawing to a close, many investors consider Asia to be the region with one of the best economic prospects next year thanks to relatively better control of the coronavirus outbreak.

But a recent wave of Covid cases in some countries threatens to weaken the region’s economic outlook, some analysts have warned.

“For some Asian giants, the Covid-19 woes are unlikely to get any better this year when the clock strikes 12 on New Year’s Eve,” said Pantheon Macroeconomics research firm.

Certainly, cases reported daily in many parts of Asia – where the virus first struck – remain lower compared to those in Europe and the US, data collected by Johns Hopkins University shows.

But some countries are now facing a resurgence that is far worse than what they experienced before during the pandemic. Even areas that have had great success in controlling the virus may not be spared, as Taiwan reported its first locally transmitted case since April 12 this week, underscoring the difficulty of eradicating Covid.

Here’s a look at the Asian economies battling a renewed wave of coronavirus infections and how that would affect their economic outlook.

• Covid-19 Census: 207,007 cumulative confirmed cases and 2,941 deaths as of Wednesday, according to Hopkins data.

The number of coronavirus infections reported daily in Japan started to rise again in November, exceeding 3,000 for the first time last week, Hopkins data showed.

According to Reuters, medical groups in the country have warned that the pandemic will put significant strain on the healthcare system. But Japanese Prime Minister Yoshihide Suga has refrained from declaring a national emergency – even though he said he would suspend a travel grant program to slow the spread of the coronavirus, the news agency reported.

Pantheon Macroeconomics economists wrote in a report Wednesday that the Japanese government’s ‘relatively soft’ rules do not appear to be working, and that this could result in tougher measures in the coming months.

As such, a second and more effective national emergency in Japan cannot be ruled out early next year, the economists said. That would weigh on the Japanese economy in the first quarter of 2021, she added.

• Covid-19 Census: 53,533 cumulative confirmed cases and 756 deaths as of Wednesday, according to Hopkins data.

As in Japan, daily new cases in South Korea this month reached levels not seen before – the first time since the outbreak was over 1,000.

But unlike Japan, the government in South Korea has taken a tougher stance in response to the new wave of Covid cases.

The government on Tuesday announced a nationwide ban on the gathering of five or more people, and ordered tourist attractions – such as ski slopes and other winter sports facilities – to be closed, Yonhap news agency reported.

Taking that step could largely mitigate most of South Korea’s economic damage in the fourth quarter of this year, according to Pantheon Macroeconomics.

• Covid-19 Census: 98,737 cumulative confirmed cases and 444 deaths as of Wednesday, according to Hopkins data.

The Southeast Asian country brought Covid cases to a trickle before the final wave started in October, Hopkins data showed. That prompted the government to impose another round of partial lockdown measures in some parts of the country.

Economists at consulting firm Capital Economics said the outlook for the Malaysian economy has become “less optimistic” this quarter, especially on private consumption.

“A second wave of the virus and the re-imposition of many movement restrictions will have reversed the strong uptick in private consumption in Q3. The high-frequency Google mobility data suggests that social aloofness remains a drag on activity,” they said in a report from Tuesday .

But the other parts of the economy – such as exports – should continue to perform strongly, so the overall economic blow from the latest rebound is likely to be “much smaller” than the previous wave, the economists said.