COVID policies in Asia-Pacific have put regional economies on a weaker recovery path than the rest of the world.
“While the region was highly successful in curbing the spread of the virus early in the pandemic, it was slow to vaccinate, and is now only gradually reopening borders and relaxing mobility,” S&P Global Ratings said
It believes the region’s vaccination coverage and economic reopening have just recently reached levels that can sustain a recovery that has faltered all year.
It said that China continues with its zero-COVID strategy. Authorities have been enforcing brief but stringent lockdowns in parts of the country to control outbreaks in those areas. China’s lockdowns are effective in preventing infections but weaken consumer confidence, spending, and growth.
“Policymakers are still refraining from adding much stimulus. Credit growth is on the moderate side and property sector controls are still tight. “China’s central bank is unwilling to go back into high credit growth territory as it seeks to contain financial risks,” it said.
Likewise, there hasn’t been significant action on the fiscal front as the emphasis remains on quality rather than quantity of growth,” said S&P Global Ratings’ global chief economist Paul Gruenwald.
We forecast 2022 growth in China at slightly below 5%, reflecting weak domestic demand, including the effects of a property slowdown and strains among developers.
In several economies across the region, pandemic escalations weighed on third-quarter economic activity. This led to downward 2021 growth forecast revisions in Japan, Malaysia, Vietnam, and Australia.
“The full implications of China’s evolving growth model present a key risk to our outlook for Asia-Pacific,” said Gruenwald. “Slower growth arising from reining in credit excesses should support sustainable growth down the line. However, curbs on private sector entities could affect productivity gains, which will be a major growth driver for China over the next five years.”
