Alice Woodhouse in Hong Kong
The global recovery remains on track, despite fears of the economic hit from a “second wave” of infections, according to ANZ economists.
Governments have imposed “more modest” restrictions on movement to handle rising infections and countries have seen improved health outcomes, resulting in a smaller hit to economies compared with lockdowns in the first half of 2020.
“What hasn’t changed unfortunately is that it will still take quite some time in many economies for activity to return to pre-Covid levels,” said Richard Yetsenga, ANZ chief economist. “In the advanced economies this is unlikely to be until 2022, while in Asia, which has generally managed this crisis more effectively, it varies between 2020 and 2022.”
Policymakers have been able to adjust the response for the second wave and global trade has also recovered after being hit in the first half of the year.
The bank forecasts that economic growth in Asia outside China is unlikely to see a repeat of the “extreme contraction” in the second quarter of 2020, but that the recovery will be uneven.
Uncertain job prospects and changing containment policies will prolong the recovery in the region.
ANZ said it had revised its China GDP forecasts upwards on the expectation that the country will have a vaccine available by the end of the year. It now expects growth of 2.1 per cent for 2020.
China’s recovery appears to be “well on track” after the country controlled its initial outbreak and subsequent localised infection clusters, ANZ said, with positive signs from an uptick in consumer spending.
In Japan, the government has “resisted” imposing a second state of emergency, ANZ said, meaning that it is consumer and business caution that is “stifling the economy”.
The bank assessed the Japanese government’s “Go To Travel” campaign as having failed to boost domestic tourism spending. It forecast Japan’s economy would shrink by 6 per cent in 2020 and grow 2 per cent in 2021.