NOA Episode 2.1 A Deep Dive into the Socio-Economic Impacts of Coronavirus

Our topic for this two-part podcast is a snapshot of the socio-economic impact of COVID-19 in East Asia, the South East Asia region, South Asia and the Middle East. In this episode, we will be touching bases with issues like China’s global economic integration, impacts on the worst-hit sectors like that of travel and tourism, and finally, dispel the myth behind the uncannily low numbers of cases detected in South Asia.

Image Source: Issei Kato/Reuters

Image Source: Issei Kato/Reuters


East Asia and the South East Asia region

How would you describe the general impact of Covid-19 on China?

As a pandemic that started in China and is now a world-wide emergency, its economic impact on China is profound and to put this into perspective, China’s GDP contracted 13% during the first two months of the year. We can almost be sure that the actual impact is much bigger than these Jan-Feb figures as the lockdowns started only from late January.

On one hand, we can see China’s supply chains being roiled as factories are unable to operate. As we know, there are many government measures in place to halt the spread of the virus in the workplace. These measures, although necessary for public health, have of course directly reduced revenues for companies and frankly severely hurt many businesses. On the other hand, we also see the shrink in demand for Chinese goods as the world cuts its imports. This is significant given China’s status as the world’s largest exporter of goods who makes up a third of manufacturing globally. With all these going on, you can imagine how domestic unemployment especially in the service sector and in small and medium-sized enterprises has soared incredibly over the past few months.

Image Source: Tomohiro Ohsumi/Getty Images

Image Source: Tomohiro Ohsumi/Getty Images

Considering this integration of the Chinese economy in global markets, how has this epidemic impacted other countries, particularly in the region?

Well, because China acts as an important link between the Asian and global supply chains. Regional economies that are deeply integrated within these networks like Singapore and Vietnam have been hit severely. We can understand the degree of economic integration if we look at the manufacturing industry in the neighbouring countries.

In the case of South Korea, lots of factories have been forced to shut due to regulations but also because of a shortage of parts from China. Samsung for example, has had to shift some of the parts it sources from China to its two factories in Vietnam. This works for some major corporates.

However, it is not always an option for lower-margin sectors such as those in textile, where producers need to find cost-effective suppliers elsewhere or dip into their inventories until they run out.


Are there any industries that stand out for being hit the hardest?

The service sector is definitely among those the most adversely affected. Particularly, the travel and tourism industry is under enormous pressure. Some say that the coronavirus is the biggest challenge to tourism since World War 2. With global events cancelled, non-essential travel restricted, and holiday-makers having to self-isolate at home, hotels and airlines are suffering tremendously. This leads to many layoffs and workers having to take unpaid leave, which once again feeds into the shrinking demand for goods and services.

The severity of the impact would depend on how long the pandemic lasts and could be exacerbated by restrictive measures like extended impositions of blanket bans. We see this for example when the Australian government previously announced a travel ban on arrivals from mainland China.

On the contrary, which are some notable industries that have gained because of this epidemic?

Some sectors have of course cultivated during these times. As schools are suspended and people work remotely, we can see online communications and education platforms like Zoom thriving. We also see that social networking services like TikTok and Houseparty take advantage of the current social distancing across the globe.

Many assume that ecommerce has gained as consumers change their shopping habits to avoid contagion. This is perhaps true in the short run as we see huge demands for orders and deliveries and products being sold out. However in the long term with supply chain issues, product shortages and potentially declining consumer demand. E-commerce growth might not be as bright as we see now, especially if the economy goes into recession.


Naturally, the SARS epidemic of 2003 was accompanied with grave economic costs as well. How is this different, and how have governments responded to these?

If we compare COVID-19 to the Sars epidemic during 2002-2003, the Chinese economy is much larger and more integrated with other countries. Trade within the Association of Southeast Asian Nations+3 region is taking a hit during the pandemic.

Many Asian governments have proposed enormous amounts of stimulus packages for their battered economy. Japan has approved a 108 trillion yen package, which is worth about a fifth of its GDP.

Singapore has also unveiled its third set of measures in three months. In total, the city state’s stimulus now stands at some 60 billion Singapore dollars, which is 12% of its GDP.

There is no doubt that fresh injections are crucial. However, many economists have said that any amount of fiscal injections, liquidity boosts or interest rate cuts would not be as effective as successfully containing the outbreak.

In other words, we should see fiscal or monetary stimulus as band-aids that are mitigating the negative shock only in the short term.

Image Source: Ee Ming Toh/AP Photo

Image Source: Ee Ming Toh/AP Photo

Is it safe to say that East Asian and Southeast Asian countries would not be meeting their growth targets this year?

Even with these fiscal injections, until the government can fully contain the outbreak, it will be very difficult to achieve economic growth targets set out previously. Many countries in the region are likely to go into recession, for instance, Singapore with the most optimistic forecast is predicting a growth of just 0.6 % this year.


South Asia

All countries in South Asia have coronavirus cases, and notably all these countries have weak public healthcare systems. Coupled with the fact that it is the most populous region of the world at just under 1.9 Billion, it is a particularly vulnerable hotspot for an outbreak. The worst affected countries in the region, and the only ones with official cases over a thousand as of now, are India and Pakistan.

How is India controlling the outbreak, and what are some of the most pressing issues it’s facing?

The number of infected in India is 11,933 as of now and the nation is currently under a lockdown to control the virus till the 3rd of May. Because of the sheer size and population of the country it has become particularly hard to zero down on emerging hotspots, and two particular issues have made containing the virus a hard task in the country- mass exodus of migrant workers and large gatherings despite a lockdown being in place. Apart from this, there is also a huge deficiency of protective equipment for healthcare workers and this combination of a weak public healthcare and large population translates to extremely low testing rates.

Would you be able to tell us more about how the mass exodus unfolded, and whether there were any particular gatherings that have contributed to a spike in cases, like in Malaysia?

A large majority of daily-wage workers in urban areas in India hail from rural villages, and when the nation-wide lockdown was imposed they had no source of income and many were evicted from their rented residences as well. This triggered a large scale migration of workers to rural villages, and with inter-state transportation shut down this was done by foot. At the moment, makeshift camp and feeding centres have been set up to tackle this, but of course the benefits of these have not reached many. As for gatherings since the lockdown, multiple rallies and congregations have been carried out. The most infamous of these incidents is undoubtedly the Indian Tablighi Jamaat event in Hazrat Nizamuddin in Delhi, which immediately contributed to 65% of fresh cases, or about 1,100 infections.

What are some ways that COVID-19 has impacted the Indian economy?

As for the economic impact, anyone who has been following the Indian economy for a while would know to expect the absolute worse. Many prominent economists, including former RBI governor Raghuram Rajan, believe this period to be the greatest crisis faced by the Indian economy since its independence in 1947. India entered the crisis itself with a huge fiscal deficit, with growth plummeting to 4.7% last year and unemployment at its highest in 45 years. Many firms in the MSME sector would not be able to survive. The relief package rolled out is tiny compared to that of other large economies such as US or Germany, but fiscal constraints concerning healthcare expenditure for the government are much higher as well.


As for Pakistan, how is the civilian government and the military, which have clashed several times in the country’s history, been working together to control the epidemic?

Pakistan, like all South Asian countries, mirrors the hurdles faced by India. The number of infected in Pakistan are around 5,988 as of now. The Prime Minister initially downplayed the severity of the virus and ignored calls to enforce the lockdown, as it could cripple the already weak economy. However, it only served to highlight the existing tensions with the military, as it deployed across the country and set military checkpoints in cities to enforce a lockdown anyway. Just like Nizamuddin in India, an event organised by the Pakistani Tablighi Jamaat in Lahore led to a spike in cases, and thousands were quarantined. Notably, both the events in Delhi and Lahore were attended by foreign nationals, and this particular incident was responsible for the introduction of the virus to the Gaza Strip via two Palestinians who attended the event as well.

What about the Pakistani economy? Is it as severely affected as the Indian economy?

On the economic front, Pakistan too entered the epidemic particularly fragile to start with. Only last year did Pakistan go to the IMF for another bailout, and again it is the informal sector, where tens of millions are engaged in daily-wage labour, which stands to lose the most at the moment. Pakistan and India are both oil importing countries, and obviously stand to gain from the oil price plunges, but it is not going to compensate for other challenges in either of these countries.

It seems that the social issues which were highlighted, as well as the response of public healthcare, have some similarities across the countries in that region.

In a nutshell, all across South Asia public healthcare is weak. Testing is extremely low. And most countries in South Asia have suspiciously low figures. In Afghanistan, despite a daily trickle of people from Iran- one of the global hotspots of Covid-19- the official number of cases are only 784. These surprisingly low figures are simply the result of low testing. The population is high and live very close to one another in these communal societies, which makes social distancing quite hard. There are a large number of poor as well who live off daily-wages, and relief packages may 1. Be inadequate and 2. Fail to reach them, which is a highly likely scenario. A lack of planning and organisation along with very restricted testing really does mask the severity of the outbreak in the region, and it is causing the brunt of ground-level difficulties to fall on the poor in South Asia.


Podcast Hosts: Bernice Ng and Prisha Bhandari

Editor: Angela Zhou

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NOA Episode 2.2 A Deep Dive into the Socio-Economic Impacts of Coronavirus

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