Covid’s resurgence in Japan, South Korea could hurt Asia’s economic recovery

SINGAPORE – At the end of 2020, many investors consider Asia to be the region with one of the best economic prospects for the coming year, thanks to its relatively better control of the coronavirus outbreak.

But a recent increase in Covid cases in some countries threatens to obscure the region’s economic prospects, some analysts warned.

“For some of Asia’s giants, this year’s Covid-19 problems are unlikely to improve when the clock strikes 12 on New Year’s Eve,” said research firm Pantheon Macroeconomics.

To be sure, cases reported daily in many parts of Asia – where the virus first hit – remain lower compared to those in Europe and the US, data compiled by Johns Hopkins University showed.

But some countries are now struggling with a resurgence far worse than what they experienced at the beginning of the pandemic. Even the territories that have had the most success in containing the virus may not be spared, with Taiwan this week reporting its first locally transmitted case since April 12 – underscoring the difficulty in eradicating Covid.

Here’s a look at Asian economies battling a renewed rise in coronavirus infections and how it would affect their economic outlook.

• Covid-19 count: 207,007 confirmed cumulative cases and 2,941 deaths on Wednesday, according to Hopkins data.

The number of daily coronavirus infections reported in Japan started to increase again in November and last week exceeded 3,000 for the first time, data from Hopkins showed.

Medical groups in the country have warned that the health system is under considerable pressure from the pandemic, according to Reuters. But Japanese Prime Minister Yoshihide Suga refrained from declaring a state of national emergency – although he said he would suspend a travel subsidy program to slow the spread of the coronavirus, the news agency reported.

Pantheon Macroeconomics economists wrote in a report on Wednesday that the Japanese government’s “relatively soft” rules of social detachment do not seem to work and that this could result in tougher measures in the coming months.

“Thus, a second most effective national state of emergency in Japan early next year cannot be ruled out,” said economists. This would weigh on Japan’s economy in the first quarter of 2021, they added.

• Covid-19 count: 53,533 confirmed cumulative cases and 756 deaths on Wednesday, according to Hopkins data.

As in Japan, South Korea’s new daily cases this month reached levels never seen before – surpassing 1,000 for the first time since the outbreak.

But unlike Japan, the government took a tougher stance in South Korea in response to Covid’s new wave of cases.

The government on Tuesday announced a national ban on gathering five or more people and ordered the closure of tourist attractions – such as ski slopes and other winter sports facilities -, reported the Yonhap news agency.

Taking this step would allow most of South Korea’s economic damage to be contained mainly in the fourth quarter of this year, according to Pantheon Macroeconomics.

• Covid-19 count: 98,737 confirmed cumulative cases and 444 deaths on Wednesday, according to Hopkins data.

The Southeast Asian country reduced Covid’s cases to a drop before the most recent peak started in October, data from Hopkins showed. This led the government to impose a new round of partial blockade measures in some parts of the country.

Economists at Capital Economics consultancy said the outlook for Malaysia’s economy became “less optimistic” this quarter, particularly with regard to private consumption.

“A second wave of the virus and the re-imposition of many restrictions on movement will have reversed the strong recovery in private consumption in the third quarter. Google’s high-frequency mobility data suggests that social distance remains an obstacle to activity,” they said in a report from Tuesday.

But other parts of the economy – such as exports – are expected to continue to perform strongly, so the overall economic impact of the latest resurgence is likely to be “much less” than the previous wave, economists said.