Economic and Social Survey of Asia and the Pacific 2021

Towards post-COVID-19 resilient economies

East and North-East Asia Policy Dialogue

19 April 2021

Main messages

• The socio-economic impact of the COVID-19 pandemic was amplified by lack of resilience and investments in people and the planet.

• Continuity in policy support is a must and recovery packages should focus on building resilience and investing in the 2030 Agenda.

• To deal with various economic and non-economic shocks, a more integrated risk management approach to planning and policymaking is needed.

• We propose a "Building Forward Better" policy package that calls for investments in social services, digital access and green development.

• To implement the BFB package, countries would need to build fiscal spaceand explore a range of financing options.

The present: COVID-19 is a stark reminder that

health emergencies cause not only social

damage but also entail economic risks

5.75.9

5.3

4.2

-1.0

2016 2017 2018 2019 2020 2021 2022

Asia-Pacific region experienced its worst economic performancein recent history...

GDP growth (%) in developing Asia and the Pacific

… with significant socio-economic costs.

Source: ESCAP based on ILO (2021) and WB data

89

158

172

0

20

40

60

80

100

120

140

160

180

200

Post-pandemic increase 2020

$1.90 per day

$3.20 per day

$5.50 per day

Post-Pandemic increase in poverty

(Asia-Pacific, millions of persons)Equivalent number of full-time jobs lost in 2020

(millions of jobs, 48 hours/week)

140

35

24

80

10

20

40

60

80

100

120

140

160

Asia-Pacific East Asia South-East

Asia

South Asia Pacific

5.75.9

5.3

4.2

-1.0

5.9

5.0

2016 2017 2018 2019 2020 2021 2022

Given considerable uncertainty, economic outlook is cautiously optimistic for 2021-22

GDP growth (%) in developing Asia and the Pacific

Less sharp GDP deceleration in East and North-East Asia…

GDP growth (%) in East and North-East Asia subregion

6.16.3

6.0

5.4

1.6

6.8

5.4

2016 2017 2018 2019 2020 2021 2022

…with smaller poverty increase in East and North-East Asia

Post-Pandemic increase in poverty

(millions of persons)

0.3

2.8

15.3

0

2

4

6

8

10

12

14

16

18$1.9-per-day

$3.2-per-day

$5.5-per-day

▪ Some aspects of the COVID-19 impact

are temporary

▪ Vaccine rollouts have begun

▪ Fiscal and monetary policies are expected

to remain accommodative

▪ Strong export & regional value chains

▪ Major economies worldwide are gradually

recovering

Near-term optimism is supported by multiple factors…

▪ Slow progress & uncertainties in vaccination

▪ International tourism remains subdued

▪ Debt distress is on the rise

▪ Long-lasting impacts on productivity

▪ Capital flow uncertainties & risk of

stagflation

▪ Lingering trade tensions

...but risks are tilted to the downside...

21

22

23

24

25

26

27

28

2017 2018 2019 2020 2021 2022

…with expected permanent losses in output...

Source: ESCAP estimation

Economic output trend in Asia-Pacific

developing countries (trillion US$)

Previous trend

2020-2022

Forecast

Cumulative output loss

2020-22: $2.6 trillion

...and a likely “K-shaped” recovery in the region

Near-term policy priorities

➢ Put pandemic control first

➢ Prioritize inclusiveness for a robust recovery

➢ Ensure continuity in fiscal & monetary support

The past: Learning from Past Crises and

Recoveries to Build Resilience

Asia-Pacific faces a wide risk landscape...

Asia-Pacific Risk Landscape Selected Countries

0

20

40

60

80

100

120

140

1960s-1970s 1980s-1990s 2000-present

Nu

mb

er o

f ad

ver

se e

ven

ts

Financial crises Terms-of-trade shocks

Natural disasters Pandemics

0 5 10 15

Mongolia

Tajikistan

China

Indonesia

Turkey

Bangladesh

Fiji

Iran, Islamic Republic of

Viet Nam

Philippines

Number of adverse events

Systemic banking crises Currency crises

Sovereign debt crises Climate-related disasters

Geophysical disasters Pandemics

...where adverse shocks leave long-term scars.

-35

-30

-25

-20

-15

-10

-5

0

5

10

-1 0 1 2 3 4 5

Per

centa

ge

Year

Investment slowdown from

financial crises

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

-1 0 1 2 3 4 5

Year

Increased inequality from

pandemics

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

-1 0 1 2 3 4 5

Year

Environmental damage from

natural disasters

However, policy choices can reduce such setback!

Adverse

shocks

Policy

choices

Economic policies

Fiscal policy

Monetary and financial measures

Reserves and exchange rate regime

External financing

Structural factors

Health and social protection system

Infrastructure quality

Economic diversification

Governance and institutions

Pandemics have a more severe economic and social impact...

-6

-4

-2

0

-1 0 1 2 3 4 5

Per

centa

ge

Year

GDP per capita impact of

pandemics

High public health spending

-6

-4

-2

0

2

4

-1 0 1 2 3 4 5

Year

Consumption impact of

pandemics

Formal work arrangements

-0.3

-0.2

-0.1

0

0.1

-1 0 1 2 3 4 5

Year

Human capital impact of

pandemics

High-quality infrastructure

… in countries with pre-existing structural vulnerabilities

-6

-4

-2

0

-1 0 1 2 3 4 5

Per

centa

ge

Year

GDP per capita impact of

pandemics

High public health spending

Low public health spending

-6

-4

-2

0

2

4

-1 0 1 2 3 4 5

Year

Consumption impact of

pandemics

Formal work arrangements

Widespread vulnerable employment

-0.3

-0.2

-0.1

0

0.1

-1 0 1 2 3 4 5

Year

Human capital impact of

pandemics

High-quality infrastructure

Low-quality infrastructure

Lesson learned – 1: Respond strongly & swiftly to shocks to safeguard sustainable development

0

1

2

3

4

5

6

Financial

crises

Natural

disasters

Epidemics

Per

centa

ge

po

ints

GDP per capita

0.0

0.5

1.0

1.5

Financial

crises

Natural

disasters

Epidemics

Human capital

0

1

2

3

Financial

crises

Natural

disasters

Epidemics

Environmental performance

Difference in 5-year cumulative impact between countries with and without supportive policies

Lesson learned – 2: Integrate risk management into national development planning and policymaking

Insurance

Pre

pa

rin

g f

or

cris

is

Climate-

resilient

infrastructure

Deploying

fiscal space

Financial

regulation

Coping with crisis

Early

warning

system

Adaptive

social

protection

Remittances

and ODA

Crisis preparation and coping strategies

-10123

Sovereign Credit Rating Index Exchange Rate Flexibility Index Social protection spending(Percentage of GDP)

InfrastructureQuality Index

EconomicComplexity Index

Least developed countries Other developing countries OECD countries

0

2

4

6

8

10

12

14

16

18

20

Sovereign Credit

Rating Index

0

2

4

6

8

10

12

14

Exchange Rate

Flexibility Index

0

1

2

3

4

5

6

7

8

Social protection

spending

(Percentage of GDP)

0

1

2

3

4

5

6

Infrastructure

Quality Index

-0.8

-0.4

0

0.4

0.8

1.2

Economic

Complexity Index

Lesson learned – 3: Strengthen the resilience of least developed and other vulnerable countries

The Future: Build Forward Better to enhance the resilience of people and the planet

The recovery packages leave room to integrate social and

environmental issues

Most recovery policies are not

gender-sensitive:

Most public fund commitments

neglect green energies

Fiscal support for businesses

Social Protection

Labour market

14%

11%

9%

Note: Data shows shares of 10 countries covered by

the energypolicytracker

3%

51%

27%

Clean unconditional

Clean conditional

Fossil

19% Other energy

We propose a “Building Forward Better ” policy package...

…which brings social & environmental benefits…

-180

-150

-120

-90

-60

-30

0

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

Mil

lion p

erso

ns

-0.9

-0.6

-0.3

0.0

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

Aver

age

chan

ge

Number of poor people Gini coefficient

-30

-25

-20

-15

-10

-5

0

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

Per

centa

ge

chan

ge

Carbon emissions

-60

-50

-40

-30

-20

-10

0

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

Per

centa

ge

chan

ge

Air quality (PM2.5)

Ambitious Spending Business-as-usual spending

... but with more pressure on public debt

Developing Asia-Pacific

Go

ver

nm

ent

deb

t-to

-GD

P r

atio

(%

)

Baseline

BFB

BFB and

COVID-19

50

55

60

65

70

75

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

...but with more pressure on public debt, especially in

Asia-Pacific LDCs

Developing Asia-Pacific Asia-Pacific LDCs

Go

ver

nm

ent

deb

t-to

-GD

P r

atio

(%

)

Baseline

BFB

BFB and

COVID-19

50

55

60

65

70

75

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Baseline

BFB

BFB and

COVID-19

30

40

50

60

70

80

90

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

-60

-50

-40

-30

-20

-10

0

10

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

Per

centa

ge

chan

ge

-30

-25

-20

-15

-10

-5

0

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

Per

centa

ge

chan

ge

Number of poor people Gini coefficient

Carbon emissions Air quality (PM2.5)

Social and environmental benefits: East and North-East Asia

-30

-25

-20

-15

-10

-5

0

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

Mil

lions

per

sons

-0.09

-0.07

-0.05

-0.03

-0.01

0.01

0.03

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

Aver

age

chan

ge

Ambitious Spending Business-as-usual spending

Public debt sustainability: East and North-East Asia

Go

ver

nm

ent

deb

t-to

-GD

P r

atio

(%

)

BaselineBFB

BFB and

COVID-19

90

95

100

105

110

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

Which fiscal and financing policies can help?

Policy options to address fiscal and financing challenges in less developed countries

Actively engage in debt relief initiatives

Make debt swaps for development meaningful

Explore diaspora bonds, offshore public bonds

Incorporate catastrophic risks into fiscal planning

Policy options to address fiscal and financing challenges in emerging economies

Grant debt restructuring

Ensure medium-term debt management strategies

Explore more catastrophe insurances + bonds

Ease investment rules for pension + sovereign wealth funds

Key takeaways

• Despite a cautiously optimistic outlook, there is a risk of a K-shaped recovery – policymakers should prioritize inclusiveness for a robust recovery.

• Policymakers should assess the wider risk landscape and focus on “reducing setbacks” as well as “accelerating progress” on sustainable development.

• COVID-19 presents an opportunity to build forward better – recovery policy packages should adequately focus on social services, digital access, and climate action.

Please visit

https://www.unescap.org/kp/2021/economic-and

-social-survey-asia-and-pacific-2021-towards-p

ost-covid-19-resilient-economies

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