By Phred Dvorak
Asian nations led the world in crushing Covid-19 in 2020. Now
some are being hamstrung by border closures and other rules they
imposed to stay safe, potentially putting them behind the U.S. and
other countries in leading the global economic recovery.
Countries such as China, Thailand and Australia virtually halted
the coronavirus within their borders by shutting off entry to most
outsiders and aggressively quashing infections that slipped in.
Their citizens live near-normal lives and their economies, with
some exceptions, haven't crashed as hard as those in the West.
China managed to grow its gross domestic product by 2.3% last
year.
But that success made it less urgent for many Asian countries to
move quickly in vaccinating their citizens, since few are falling
sick. Most countries in Asia have only vaccinated a small
percentage of their populations, and most Asian economies won't
reach herd immunity until 2022, Goldman Sachs estimates. The U.S.
and U.K. will likely have vaccinated half their residents by May,
Goldman Sachs forecasts.
That could leave some Asian countries in a holding pattern,
forced to keep their borders sealed since their populations have
developed little natural immunity to the disease, even as swaths of
the world reopen businesses and international travel.
"The irony of Asia being successful in controlling Covid-19
is...that Asia's going to be later in getting to herd immunity,"
said Andrew Tilton, Goldman Sachs's chief Asia Pacific economist.
He said the Americas and Europe could show the biggest economic
gains over the next few quarters, while Asia rebounds more slowly
-- albeit from a stronger base -- or in some cases
deteriorates.
Plenty of factors could change that scenario. Vaccine rollouts
may be delayed, or new virus strains may lower the effectiveness of
inoculations.
Many people in Asia remain happy to accept tighter travel and
other restrictions, given the trade-off in lower death tolls.
And some Asian countries have adapted well to closed borders.
China, which sends more tourists abroad than it receives at home,
is enjoying a boost in domestic travel spending, while its
factories pump out goods for the rest of the world.
"Most economies that have controlled Covid have become stricter
about their borders rather than more relaxed, because they've
discovered their domestic economies can function at a reasonable
level of health without international travel," said Richard
Yetsenga, chief economist at ANZ bank in Australia.
Still, closed borders and other Covid-19 containment policies
come with costs, making it harder for countries to attract
investors, foreign workers, tourists and students. Local citizens
that need to go abroad can't return home easily.
In Australia, closed borders shaved off 20% of the $31 billion
it takes in annually from international students last year,
according to Phil Honeywood, chief executive of the International
Education Association of Australia. This year is expected to be
worse, with little clarity on when students will be allowed back
in.
Ravi Singh, managing director of Global Reach, an agency that
helps funnel South Asian students to global universities, said it
has seen a 50% reduction in the number of students registering for
Australian university recruitment events, and a doubling of
inquiries about universities in the U.K. and Canada.
"The situation is slightly dire" for countries like Australia,
he said. "Students cannot wait endlessly."
New Zealand, which has kept its Covid-19 cases below 2,500
thanks to one of the world's strictest lockdown and quarantine
programs, is taking a hit because it is so reliant on foreign labor
and tourism.
ANZ estimates that New Zealand's economy is likely 5% smaller
without tourism, though that hole has so far been filled by a
stimulus-fueled housing boom that won't last forever, said Sharon
Zollner, ANZ's chief economist in New Zealand. She predicts New
Zealand's borders won't reopen until the end of 2021 at the
earliest, and more likely early next year, pushing a full economic
recovery to mid-2022.
"People are starting to think Covid is all over and that we
dodged a bullet," she said. "But our forecasts actually show the
economy going a bit sideways this year."
Overall GDP growth is still expected to be strong across Asia,
in part because last year was so bad, which makes year-over-year
percentage gains look good. Still, many economists believe it will
be Western nations that lead growth this year.
Moody's Investors Service recently joined other economists in
marking up their forecasts for U.S. growth this year, to 4.7%
versus 4.2% in a previous outlook in November, as vaccinations make
it possible for restaurants and other services businesses to
normalize, and stimulus bolsters growth.
Consumer demand is rebounding faster in the U.S. and Europe than
in Asia, a trend that is likely to continue as Asian vaccination
rates lag and households remain wary, S&P Global Ratings wrote
in a January report.
"The popular narrative is Asia is leading the recovery and
digging the world out of a big hole. This is not quite right," the
report said.
The psychological strain of trying to prevent even tiny pockets
of Covid-19 could weigh on confidence. China, for all its recent
economic success, is one of the most nervous about outbreaks,
locking down neighborhoods and testing millions of residents when a
handful of cases surfaces.
By mid-February, China had only distributed around 40% of 100
million vaccine doses planned before the start of the Lunar New
Year holiday on Feb. 12. Goldman Sachs predicts Chinese GDP growth
will be flat for much of this year, at around the 5%-6% rate it
would normally expand, while the U.S. and U.K. will have very
strong second and third quarters.
Thailand, where up to 20% of the economy was tied to tourism, is
likely to be one of the worst sufferers from closed borders. The
country's economic planning agency has repeatedly slashed forecasts
for 2021 economic growth and now predicts the number of foreign
visitors this year will be 3.2 million, less than a tenth of the
2019 total.
To reach that, the agency assumes Thailand will be able to
vaccinate around 50% of its population by the end of this year --
an assumption some experts think is optimistic. The kingdom just
kicked off inoculations this week, with a relatively small number
of initial doses.
In the southern island of Phuket, businesses are urging the Thai
government to let them pay privately to vaccinate hotel, restaurant
and travel-agency workers so they can have the confidence to let in
foreign visitors. Without such private intervention, Phuket likely
won't be able to reach herd immunity for at least another year and
a half -- an untenable situation, said Bhummikitti Ruktaengam,
president of the Phuket Tourist Association.
Then there's the Cook Islands, a tiny Pacific nation between New
Zealand and Hawaii, where tourism accounts for around 80% of the
economy. ANZ estimates its GDP fell more than 5% last year, and
will contract another 15% this year.
The country sealed its borders last March and has never had a
Covid-19 case. The next proposed date to open borders to New
Zealand, its biggest source of tourists, is the end of this month.
But with a recent string of infections reported in Auckland, Cook
Islanders are skeptical.
Paul Ash, an owner of an 18-room resort on the main island of
Rarotonga, said the business has lost 90% of its income and
shareholders are pumping in almost $16,000 a month to keep it
afloat. He thinks his resort and others around the island can hold
on for another few months.
"It'll get to a point where it's non-recoverable," he said. "And
we're not far off that."
Write to Phred Dvorak at phred.dvorak@wsj.com
(END) Dow Jones Newswires
March 02, 2021 09:14 ET (14:14 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.