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How is the South Asia Economy Recovering from Covid-19?

Covid-19 has affected the economies of nations worldwide

When attempting to summarise the current performance and future portents for the South Asia economy, it’s arguable that most of the region’s nations are doing relatively well.

Malaysia offers a relevant case in point, as despite combatting Covid-19 whilst also dealing with a global oil price crash and political instability, the nation is poised to record economic growth of 0.5% by the end of 2020.

Sure, this is noticeably down on the initial 2002 forecast of 4.8% growth, but it needs to be considered against the backdrop of an unprecedented combination of socio-economic and geopolitical challenges.

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Similar trends have been reported in Vietnam and Hong Kong, the former of which has recorded no coronavirus deaths at all and remains one of the few nations on course to achieve economic growth this year. But which nations are really leading the recovery in this region, and what should we expect going forward?

Surviving Covid – Currencies and Stimulus Packages

Of course, one thing that unites these nations is the proactive rollout of generous stimulus and quantitative easing packages, with Malaysia having provided an RM295 billion injection into the economy.

South Asia economy
Malaysia is poised to record economic growth of 0.5% by the end of 2020. Pixabay

Of this, an estimated 15% (approximately RM45 billion) is a direct fiscal injection in the government, with the remaining capital introduced in the form of slashing base interest rates and managing inflation.

Hong Kong has also introduced several rounds of quantitative easing measures since February, with April’s iteration providing an HKD120 billion relief package and taking the total government stimulus investment to HKD290 (which equates to 9.5% of Hong Kong’s gross domestic product).

In the case of both Malaysia and Hong Kong, these measures have also helped to boost the value of domestic currencies. The Hong Kong dollar rose for the fifth consecutive day last week, for example, while the HK Monetary Authority sold a further HK£3.72 billion of local currency and continued to boost their capital inflows as a result.

The Malaysian Ringgit has also performed relatively well against major currencies of late, although it faces additional challenges in the form of the recent global oil price decline.

So, although crude oil prices have recently rebounded slightly, Malaysia’s currency value has been impacted by rising capital outflows and forced to trade within an increasingly narrowing range.

A Look Ahead – What Can we Expect?

Asia was the region first affected by Covid-19, and therefore it stands to reason that its nations should have commenced their recovery quicker than those in Europe and the US.

Interestingly, the shoots of recovery may be green in more ways than one, with the Export-Import Bank of Korea leading the return of Asian green bonds in the primary financial market.

South Asia economy
Asia was the region first affected by Covid-19, and therefore its nations should have commenced their recovery quicker than those in Europe and the US. Pixabay

Also Read: Wanting to be Truly Happy? Then You Need to Know About Vedanta

Of course, the idea of sustainable finance and investment has been a hot-button topic in Asia for a while now, while we’ve also seen a significant increase in demand for Green, Social and Sustainability (GSS) bonds in recent times.

This followed the introduction of a 700 million Euro green bond and Korea’s pledge to achieve net zero carbon emissions by 2050 (following hot on the footsteps of the UK).

With these points in mind, there’s clearly the potential for Asia to build on its relative strength and initial Covid-19 recovery by investing in sustainable assets and building a considerably greener future.

[Disclaimer: The article published above promotes links of commercial interests.]

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