Asia Economics Blog

Co-authors: Souleima El Achkar Hilal; Ian Nicole Generalao; and Rosa Mia Arao
 
This post draws from a paper presented in the ACAES session at the 2022 Allied Social Science Association Annual Meeting, program here. Youtube recording here.
 
The Covid-19 pandemic has had a devastating impact on labor markets worldwide, Southeast Asia included. There is clear evidence that the pandemic-induced job losses in the region have been highly unequal—disproportionately affecting the youth, women, low-skilled, informal, temporary, and casual workers.

Using the latest available Labor Force Surveys of Indonesia, the Philippines, Thailand, and Viet Nam, our analysis shows that youth and women bore the brunt of job losses. Young workers, who represent only 10–15% of the workforce in the four countries, accounted for a disproportionate share of job losses at 22–45% at the height of the pandemic’s impact on labor markets. This is due to their overrepresentation in heavily hit sectors like food and accommodation services, wholesale and retail trade, and “other services,” and because they were more likely to lose their jobs than more mature workers in these same sectors. Figure 1 gives details by sector.

Co-authors:  John R. Birge; Zi'ang Wang; Jing Wu
 
This post draws from a paper to be presented in the ACAES session on Asian Economies in Global Supply Chains at the 2023 Allied Social Science Association Annual Meeting, program here.

The vulnerability of global supply chains and their impact on the economy has become a central issue during the current COVID-19 pandemic. While global supply chains allow firms to outsource production more cost effectively, they also expose firms to developments in the local economies where supply chain partners are located. During the recent COVID-19 pandemic, countries took measures to contain the pandemic through shutdowns and social distancing mandates. These measures created disruptions for local firms and their supply chain partners located in different regions. Disruptions in supply chains adversely affected production for downstream firms, and financial flows for upstream firms, creating major vulnerabilities for firms connected within a production network.

When the last global crisis hit in 2008-09, the major economies of East Asia, but for one, had ample fiscal space to respond, and took advantage of that. This time around, the positioning is more mixed and the threat potentially much greater.

In Asia, the shock of the Great Financial Crisis (GFC) was inflicted mainly through export loss and capital flight. Domestic financial systems remained sound and productive capacity intact. A quick shot of fiscal stimulus was just the remedy to tide an economy over until global trade rebounded and financial capital returned. Use of such a strategy shows up in Figure 1 as a sharp increase in the debt-to-GDP ratio in 2009 for Malaysia, China, Vietnam, Thailand, Korea, and Taiwan, with the ratio then declining or stable in 2010. Two countries – the Philippines and Indonesia – saw no increase in their debt ratios in 2009, riding out the crisis without recourse to fiscal stimulus.

Updated 2 May 2022 to incorporate full year data for 2021.

A previous post analyzing the economics of the pandemic for 2020 documented widely divergent experiences in Asia with respect to case numbers, mobility loss, and export impact, and showed all three of these factors to be systematically related to GDP growth. A follow-up post on fiscal policy found that those economies with ample fiscal space used it to ramp up spending, and a post on monetary policy showed central bank balance sheets expanding under supportive global conditions. In this post, we revisit the analytics using data for 2021.

In recent years, emerging market countries—in particular, those in Asia—have been among the global economy’s star performers. Even during bad times, such as during the Global Financial Crisis, Asian EMs have seen their economies hold up better than most others.

For much of the COVID crisis, that story held true. Many Asian economies, such as Vietnam, Singapore and Taiwan, seemed to have COVID under control, while Asian EMs appeared to have significant monetary and fiscal policy room to help address any economic impact of the crisis. In April 2021, the IMF’s projections for growth in the region were extremely bullish, with a recovery to 8.5 percent growth in emerging Asia this year and 6.0 percent in 2022. Two months later, expected growth had been downgraded, to a still-healthy 6.3 percent and 5.2 percent over the same two years (see Table). The ADB was even more optimistic in its July 2021 projections, pointing to growth of 7.2 percent and 5.4 percent this year and next.

Co-Author:  Monzur Hossain

Small businesses in Bangladesh are usually started out of necessity and operate informally. They generally lack access to bank credit, possess little capital, and sell their output locally. The very nature of these small businesses makes them extremely vulnerable to the shock of COVID-19.