IMF: Flattening COVID-19 curve key to economic rebound in AsPac

MANILA, Philippines — Flattening the curve of COVID-19 cases is a pre-requisite for a firm economic recovery in Asia Pacific as the region is seen posting its most severe economic contraction in generations this year, the International Monetary Fund (IMF) said.

In a virtual press briefing on Asia Pacific Regional Economic Outlook, IMF acting director for Asia and Pacific Jonathan Ostry said some countries in the region have yet to flatten the coronavirus curve while others are still struggling with the health crisis.

“It is a prerequisite for a firm economic recovery, that the virus curve be flattened. There needs to be ongoing vigilance because, as we know, this is a marathon and not a sprint, and the virus rears its ugly head from time to time, when we do not expect it.  Health policy needs to be very vigilant and proactive,” Ostry said.

The IMF said the Philippines, Indonesia and India are still striving to flatten the pandemic curve.

The Philippines and Indonesia have seen a stabilization in COVID-19 cases, but have not suppressed the spread while India started easing restrictions.

The number of COVID-19 cases in the Philippines have breached 360,000, with close to 7,000 deaths, despite imposing the longest and strictest lockdowns in the world.

As a result, the Philippines slipped into a recession with a record gross domestic product (GDP) contraction of 16.5 percent in the second quarter from 0.7 percent in the first quarter as the economy stalled due to the lockdown.

The economy partially reopened as the National Capital Region (NCR) shifted to general community quarantine in June, but Metro Manila and nearby provinces reverted to modified enhanced community quarantine from Aug. 4 to 18 as cases doubled to more than 200,000 from 100,000.

The IMF is now expects the Philippine economy to contract by 8.3 percent this year before bouncing back with a growth of 7.4 percent next year.

Ostry said Asia Pacific may post a GDP contraction of 2.2 percent this year.

“Asia is not alone in suffering a huge contraction—the world is in this crisis together and we will only emerge from it together. This is as true of the health crisis as it is of the economic crisis. But Asia is at a different stage from the rest of the world. The region went into this crisis first and it already can offer some valuable lessons for the world,” Ostry said.

He said countries in the region have taken different approaches as COVID-19 cases are not fully under control.

“To be sure, different countries will approach this differently, and we’ve seen a variety of different approaches across the Asia Pacific, but I would conclude that there is no solid firm foundation for economic recovery, in the midst of an uncontrolled pandemic,” Ostry said.

The IMF said Asia Pacific countries are facing more hard work as labor markets have been hit hard by the COVID-19 pandemic; geopolitical, trade and technology tensions continue to threaten Asia’s export-driven growth model; and corporate as well as household sectors entered the crisis with too much leverage on their balance sheets, further amplifying vulnerability.

The multilateral lender also said macroeconomic policy support should not be withdrawn prematurely and better target fiscal support to protect the most vulnerable is essential.

The IMF also urged vigilance against emerging market credit risks from corporates and households as well as unsustainable public debt should be addressed proactively.