Asia Pacific likely will grow faster in 2021-22 than the Middle East & North Africa and Latin America, but performance will increasingly diverge within the region, said Moody's recently.
The economic rebound, fuelled in large part by China (A1 stable), masks a range of output losses across the region, the credit rating agency noted.
Moody’s forecasts about 30% of Asia Pacific economies will face a modest degree of scarring, experiencing an output decline of 2%-8% below our pre-pandemic forecast GDP levels by 2023, said Deborah Tan, a Moody's Assistant Vice President and Analyst.
“These include mainly lower-to-upper middle-income economies and those struggling to contain a virus resurgence, such as Malaysia (A3 stable), Indonesia (Baa2 stable) and Thailand (Baa1 stable),” she noted.
However, more than 40% of the region's economies will have output losses exceeding 8% of pre-pandemic GDP forecast levels, according to Moody’s.
Economies with the deepest scarring generally have concentrated economic structures or weaker institutional capacity, said the firm, adding that these are economies with lower-middle incomes, with deep scarring likely to increase social risks.
In some of these economies, high debt burdens are limiting governments' fiscal space to withstand the pandemic, Moody’s noted, adding that economies that emerge relatively unscathed have generally mounted effective health responses and provided more fiscal support.
Nearly 30% of economies in Asia Pacific will record strong post-pandemic growth and return to pre-crisis GDP levels by 2022 or 2023, Moody’s predicted.
These economies mainly have high incomes, mature institutions, strong healthcare infrastructure and dynamic labour markets, the firm pointed out.
Secular trends accelerated by the pandemic could affect the depth of scarring beyond 2023, Moody’s warned, adding that these include automation and trade regionalisation, which could have longer-lasting effects on social risks and the reallocation of investments across countries.