Covid is now hitting components of Asia tougher than the beginning of the pandemic
A man wearing a face mask as a preventive measure against Covid-19 walks down an empty street in Chinatown.
Wong Fok Loy | SOPA pictures | LightRocket via Getty Images
SINGAPORE – Southeast Asia saw a sharp spike in Covid-19 cases last month, showing little sign of slowing, and the situation is expected to delay most of the region’s economic recovery.
Major economies in this part of the world, including Indonesia, Malaysia, Singapore, Thailand, Vietnam and the Philippines, saw sharp increases in daily reported cases and deaths from the disease in July.
Information compiled by the online publication Our World In Data showed that Malaysia had 515.88 confirmed Covid infections per million people on July 31, based on a 7-day moving average. That number has increased steadily since June 30, when it was around 180.85.
Behind Malaysia, Thailand ranks 236.02 new cases per million people as of July 31, followed by Indonesia with 147.20 cases, despite imposing a partial lockdown and stepping up contact tracing and quarantine efforts. Cumulatively, Indonesia recorded more than 1.2 million new cases in July.
Vietnam, the Philippines, and Singapore also saw increases in new cases per million people every day, but the numbers were lower compared to the other three countries.
Bank of America said in a research note last week its calculations showed that the region’s average daily cases rose 162% over the past month to a new record of 72,200, while daily deaths rose from 500 per day to an average of 1,500 People have tripled.
Indonesia and Malaysia had the highest death rates per million people in July, according to the bank.
The situation forced Southeast Asian governments to reinstate lockdowns and social restrictions to slow the spread as some ran out of hospital beds, medical equipment and oxygen supplies.
The highly contagious Delta variant has also been discovered in the region, adding to concerns about limiting transmission and making reopening plans difficult. Longer lockdowns can be extremely costly and damaging, especially in countries like Indonesia where there is a large informal sector and many people earn a daily wage.
Lockdowns and social restrictions are likely to affect economic activity in the region. Experts say the impact will be stronger in countries with more stringent restrictions – including Malaysia, Vietnam, and Indonesia.
This could potentially hit the region’s manufacturing sector, which is mostly low-tech and labor intensive, making it more prone to pandemic-related disruptions.
Bank of America economists said in a separate note last week that recent lockdowns in Southeast Asian economies have “started to weigh on factory output.” They pointed to a decline in the manufacturing purchasing managers’ index, or PMI – a measure of factory activity – in countries like Thailand, Indonesia, Malaysia and Vietnam.
Data sent to CNBC by IHS Markit showed that manufacturing PMIs for Indonesia, Malaysia, Thailand and Vietnam remained below 50 in July, indicating a decline in factory activity.
“Although the lockdown impact on the ASEAN PMI this time around was not as significant as it was in April 2020, the magnitude is already close to a negative shock with 4 standard deviations,” wrote Bank of America economists, adding that the consequences are already there bigger than what they’d seen in India during its devastating second wave.
Australian bank ANZ cut its GDP growth forecasts for the six major economies of Southeast Asia for 2021 from 4.6% to 3.9%. For 2022, the forecast remained unchanged at 5.4%.
The downgrade rules out Singapore, where growth indicators remain within expectations despite movement restrictions, said Sanjay Mathur, chief economist for Southeast Asia and India at ANZ.
“Elsewhere, the recent wave of pandemics and the associated tightening of restraints on recovery have done significant damage,” wrote Mathur, citing declining consumer confidence, undue weakness in service industries and the waning effectiveness of expansionary fiscal and monetary policies.
He highlighted two new issues that could further affect the growth outlook – first, the slowdown in factory activity, and second, slowing growth in China.
The speed of vaccination in Southeast Asia varies from country to country. Information from Our World In Data showed that Malaysia and Singapore administered comparatively more daily doses per 100 people on a moving average over seven days than the rest.
Singapore had fully vaccinated nearly 58% of its population before the end of July, while Malaysia’s fully vaccinated population was around 21.02%.
Indonesia, the most populous country in the region, had only fully vaccinated 7.51% of its population as of July 31.
Bank of America predicted that most countries in Southeast Asia could potentially achieve herd immunity in the first three months of 2022 if they increase their vaccination rate. Herd immunity occurs when a disease stops being transmitted quickly because most of the population is immune after vaccination or infection.
– CNBC’s Nate Rattner contributed to this report.