Summary

● Since the onset of COVID-19 at the end of January, countries around the world have suffered major losses in economic activities, but at varying degrees. Hence, pace of recovery is expected to differ across countries.

● Countries that are more dependent on domestic demand in anchoring growth, such as PH and ID, are likely to incur deeper income lossses as they may face stringent and prolonged movement restrictions.

● Via the external demand channel, after weighing the parameters of exports dependency, trade relation with top-10 countries with highest COVID-19 cases, tourism activity, and current account balance, VN stands to be most vulnerable followed by MY and PH.

● In terms of policy buffer, SG, ID, PH demonstrate a sufficient buffer to soften the economic shock, given sizeable foreign exchange reserves, ample monetary policy space and responsive fiscal actions.

● Overall score: SG, TH and ID were among the top three that may recover at a faster pace from this crisis. AlthoughMY, VN and PH scores were lower, they were commendable.

● MY scored relatively higher on handling of the COVID-19 from spreading and the sheer size of its fiscal stimulus as well as its aggressive monetary policy. Over dependence on external demand, supply chain disruption, a diminishing resource balance and high debt were the main drag for MY.

● Meanwhile, VN scored the best in terms of handling of the COVID-19 pandemic, but its overall score was dragged by supply chain disruption and overdependence on exports. Though PH was less dependent on exports, its economy was least diversified and overdependent on domestic demand.

● Sincethe onset of COVID-19 at the end of January, countries around the world have suffered major losses in economic activities, but at varying degrees. In this report, we will zoom into the ASEAN-6 economies, which comprised of Indonesia (ID), Malaysia (MY), Philippines (PH), Singapore (SG), Thailand (TH) and Vietnam (VN), and gauge the pace of recovery once the pandemic ceases, by looking at the facets of domestic demand, external demand and policy buffers.

● Domestic-driven economies that are worst-hit by the pandemic would bear the greatest brunt from income losses following the government stay-at-home order

- Out of the six countries, PH, VN and ID are most reliant on domestic demand in driving growth, with its share of GDP rounded to 100% in 2019. Coupled with the uncontrollable spread of COVID-19 and stringent lockdown measures, PH and ID would suffer a relatively deep downturn, if based solely on the domestic demand perspective. Business and consumer activities are likely to be disrupted, with households shifting towards cautionary spending habits as many suffer layoffs and salary cuts. Meanwhile for VN, domestic activities may improve at a faster rate as the severity of the pandemic is substantially lower.

▪ PH: a total of 7,579 number of cases were registered in PH, with 11.4% recovery rate, one of the lowest in Southeast Asia. The mortality rate stands at 6.6%, slightly lower than the global average of 7.0%. The governmentimposedLuzon Enhanced Community Quarantine and stringent distancing measures in the National Central Region for 30 days from 15th March to 14th April, which is then extended until mid-May considering the number of cases is still increasing rapidly.

▪ VN: in a population of one million, only 3 people are infected by COVID-19 in VN. The country reported its first case on 24th Jan and since then, it accumulated a total of 270 number of cases with no death and the recovery rate is at 83.3%. Days preceding, there are only 2 new cases reported in VN and to note, during SARS, VN is the first country to contain the outbreak in just 20 days. Much of the success is attributable to its proactive government that adopts gradual strict containment measure by conducting strict screening on passengers at airports, seaports and land crossings as early as 23rd January, when it only recorded 2 positive cases.

Source: Kenanga Research - 27 Apr 2020