COVID-19: How it Impacted the Asian Economies and Policy Responses

The World Health Organization (WHO) announced the Covid pandemic on March 12, 2020, as the new virus began to spread. Since the end of December, the virus known as COVID-19 has been spreading throughout Asia. Nearly all nations implemented various measures, such as lockdowns, to reduce face-to-face interactions between the susceptible and the sick to contain the public health hazard.

Although these proactive actions save lives, they also produce a large negative economic shock that abruptly stops demand and severely affects supply, the global production value chain, and commerce. The results are disastrous: a significant drop in output, a sharp increase in unemployment, numerous bankruptcies, and constant concerns about the economy’s viability. The outcome is a global economic downturn worse than the one seen during the Great Financial Crisis of 2008–2009.

The COVID-19 experiences in Asia come before those in the West. This fortunate timing enables Asia to impart lessons learned from experiences to benefit the entire world. To educate the public, the Asian Bureau of Finance and Economic Research (ABFER) community has compiled a collection of insights. These commentaries offer detailed information on the epidemic’s effects, the efficacy of measures taken to contain it, and the ensuing economic impacts from such implementation. They also offer access to research on the pandemic in Asia.

In India, Bangladesh, and Pakistan, the COVID-19 pandemic has significantly expanded income and wealth disparity and plunged millions of households into poverty. Policymakers face a significant problem due to this predicament, especially because rising food and commodity prices exacerbate economic vulnerabilities.

INDIA

The government of India increased spending on sanitization, water supply, and healthcare. This made up 1% of the GDP in FY2021. The National Digital Health Mission was introduced to digitalize healthcare in September 2021. The pandemic spurred the usage of digital technologies, increasing the number of internet subscribers as a result. The Indian administration of NarendraModi pushed pro-growth policies in 2020. Still, a major second wave of COVID-19 cases starting in April 2021 inflicted emotional and social suffering and seriously hampered the country’s economy.

JAPAN

The COVID 19 epidemic led to a recession in Japan at the beginning of 2020. As GDP increased by 22.8% in the third quarter, the economy was able to rebound. In that quarter, exports grew well by 33.2%, but because investor mood was poor, private investment fell by 8.4%. To further encourage the economy’s expansion, the government started the vaccine deployment on February 16, 2021.

CHINA

China had a severe economic slowdown as a result of COVID-19. Travel restrictions and stringent lockdowns significantly impacted consumption and travel-related services. The worsening state of the labor market contributed to an increase in the unemployment rate to 6.6%. Because cross-border commercial activity remained sluggish, tourism and exports of goods and services suffered significantly. The COVID-19 vaccination program was launched in late February and was expected to reach more than 60% of the population by the fourth quarter. The government’s relief measures anticipated an increase in domestic demand by easing some of the limitations. Chinese healthcare companies have been flooding the market with home-test kits.

PAKISTAN

The early reopening of the economy helped Pakistan reduce the economic effects of the pandemic. Still, the economy’s long-standing structural problems would make it difficult for the country to experience substantial growth.

BANGLADESH

The Bangladeshi administration of Sheikh Hasina faces difficulties as export revenues slowly increase. However, the nation will probably continue to be politically and economically stable, and a return to rapid economic growth will probably happen in 2022 and beyond. Failure to achieve equal recovery could result in social unrest, political unrest, and harsh retaliation from governments that have grown less tolerant of divergent viewpoints in recent years.

POLICY RESPONSES

The government relied on fiscal and monetary policy to combat the effects of COVID-19. Numerous actions were done to assist households, businesses, and workers. Expanding monetary policy resulted in a fall in central government interest in encouraging more investment. It was done to encourage investors to put money into investments. Inflation in central Asia was predicted to be 6.8% in 2021 due to trade disruptions and travel restrictions during the epidemic. As these restrictions are relaxed, it was anticipated that the inflation rate would decrease to 6.3% in 2022.

It is possible to employ expansionary policies to address the negative consequences of COVID-19. Tax reductions and increases in infrastructure, education, and development investment should all be implemented as a sound fiscal policy. Increasing the money supply through monetary policy can also aid economies in recovering from their losses. Money supply growth promotes investment spending by lowering interest rates. These measures will raise overall demand, increasing the economy’s GDP. There is a difficult trade-off between protecting the public’s health and ensuring economic security through detailed examinations of government policies and the economic rescue packages they are associated with.