Southeast Asian economies are experiencing a decline in growth at an unprecedented rate. The COVID-19 pandemic is considered the main cause pushing the economy of the region, which has seen dynamic growth for many decades, into trouble. Consecutive “bad news” about the economic slowdown has been announced by governments of Southeast Asian countries in recent days.
The National Economic and Social Development Council (NESDC) of Thailand said on August 17 that the economic growth rate of the country has dropped its most since the Asian financial crisis in 1998. Accordingly, the gross domestic product (GDP) of Thailand has decreased by 12.2% compared to last year. NESDC also forecasts that Thailand's economic growth in 2020 will decline by 7.3% to 7.8% compared with the previous forecast of a 5% to 6% decrease. The unemployment rate is 1.95% and there are about 1.8 million workers at risk of losing their jobs.
The Central Bank of Malaysia has just said that Malaysia’s GDP decreased by 17.1% compared to the same period last year. This is the deepest decline since the Asian financial crisis. Malaysia's GDP is forecast to decline by 4% to 6% this year. Meanwhile, restrictive measures have created demand and supply shocks as global border controls have impacted heavily on the tourism sector.
Previously, other major economies in the region such as Singapore, Indonesia, and the Philippines also received negative statistics on economic growth. The “economic picture” of Singapore became gloomier when the Ministry of Trade and Industry announced that the country’s GDP in the second quarter of 2020 was -13.2%. It is forecasted that the GDP growth of the whole year 2020 of the “Lion City” will be between -7% and -5%.
In Indonesia, the country’s statistics agency said that the Indonesian economy declined by 5.3% in the second quarter of 2020. This is the first time the largest economy in Southeast Asia has declined since the first quarter of 1999. Meanwhile, in the second quarter of this year, the economic growth of the Philippines also dropped by 16.5% over the same period in 2019.
Other Southeast Asian economies such as Laos, Cambodia, and Myanmar also experienced a decline in growth and face many difficulties, in the context that key sectors such as tourism, aviation and exports have stalled while financial and social security pressure has increased.
According to a report released by the Ministry of Tourism of Cambodia, as of July, 2020, over 3,100 businesses operating in the tourism industry had to close, resulting in more than 110,000 workers losing their jobs. Cambodia is expected to take seven years to revive its tourism industry. Meanwhile, in Laos, macro-balance challenges are on the rise and economic growth is weaker due to the impact of the pandemic on both manufacturing and tourism.
In addition to the negative impact from the COVID-19 pandemic, some Southeast Asian economies also face many other economic difficulties such as weak infrastructure and logistics, reducing the competitiveness of the economy with export activities are under pressure due to the appreciation of local currencies.
In addition, the regional and international environment is not favourable for the development of Southeast Asian economies as the psychology of anti-globalisation and supporting protectionism has increased; and regional security, instability and climate change have also negatively impacted the economic growth of the region.
Southeast Asia is known as a dynamically developing region, a “bright spot” in the world economic picture and has contributed significantly to global economic growth for many years. Therefore, the sharp decline in the growth rate of these dynamic economies shows that the global economy is facing extremely serious challenges.
The above-mentioned worrying statistics show that the negative impact of the COVID-19 pandemic on regional economies has lasted longer than previously forecasted. It is essential that in the coming time, Southeast Asian economies must further strengthen their linkages as well as devise a more long-term joint plan in the “war” to realise the dual goal of controlling the epidemic and combating the economic depression.