Covid-19 variant wreaks havoc on South-east Asia's economies as retail, tourism stumble

Closed stores are seen at a shopping mall in Jakarta, on July 3, 2021.
Closed stores are seen at a shopping mall in Jakarta, on July 3, 2021.PHOTO: REUTERS

JAKARTA - With its sprawling gym, multi-screen movie theatre and coffee franchises, the Kota Kasablanka shopping mall to Jakarta's south has catered successfully to the capital's emerging middle class.

Since opening in 2012, its 110,000 square metres of leasable space has been fully rented out.

But as Indonesia shutters stores and non-essential businesses a second time to staunch a spiralling health crisis, a tenth of the mall's eateries and retail outlets have closed for good. More may follow, threatening the livelihoods of many of the 10,000 people who work there.

"It looks like there will be even more," Ms Lusiana, the mall's managing director told The Straits Times, referring to the permanent closures. "A lot of tenants are grumbling about the lockdown."

Sharp spikes in coronavirus infections and a slow roll-out of the vaccines needed to stop it are wreaking havoc on South-east Asia's economies, throwing a wrench into its consumer sector and stymying efforts to revive tourism.

On Monday (July 12), Bank of Thailand (BoT) senior director for economic policy Chayawadee Chai-Anant told analysts on a conference call that the central bank was considering cutting its gross domestic product forecast again, following a 120 basis point downgrade last month.

On the same day, Bangkok closed its large shopping malls for two weeks, to stem the latest wave of Covid-19 infections.

"The Delta variant and a high number of cases could delay herd immunity, the country's reopening target, and economic recovery. So, it's possible that the BoT will miss the existing GDP forecast under the baseline scenario," Ms Chayawadee was quoted as saying in a report carried in the Bangkok Post.

As a result, with the exception of Singapore, South-east Asia, a region once renowned for its fast growth and increasingly wealthy population, risks falling behind its Asian neighbours.

"Asean is falling behind its north-eastern neighbours in terms of economic rebound," Ms Alicia Garcia Herrero, Asia-Pacific chief economist of Paris-based investment bank Natixis said in a report.

"Absence of foreign visitors and delayed vaccinations are important reasons."

Last week, Indonesia revised its GDP estimates, forecasting growth of between 3.7 per cent and 4.5 per cent, down from between 4.5 per cent and 5.3 per cent.

Malaysia, too, still in its third set of lockdowns since the pandemic began and beset by political turmoil, will likely need to cut its GDP outlook, economists say.

Last month, the World Bank lowered its Malaysia forecast a third time since December, to 4.5 per cent from 6.7 per cent late last year.

In contrast, China's GDP is expected to surge 8.5 per cent this year. Last month, Taiwan's government raised its forecast for the island's economic growth by nearly a percentage point to 5.46 per cent. Governments in South Korea and Japan have also upgraded their outlooks.

Consumer spending in Asia, including China and Taiwan will surge nearly 13 per cent this year, according to The Economist Intelligence Unit. But for the six biggest Asean markets, namely Indonesia, Malaysia, Singapore, the Philippines, Vietnam and Thailand, spending will tick up only 2.7 per cent.

At issue is the slow roll-out of vaccines and governments' management of the pandemic.


Only 6.4 per cent of Thailand's population is fully vaccinated. PHOTO: AFP

Only 6.4 per cent of Thailand's population is fully vaccinated, even though 20 per cent of the economy depends on tourism, according to Bloomberg.

Some 18,000 tourists are expected to visit the island of Phuket this month, where Thailand is trialing a limited programme to kickstart tourism, but that's small beer compared with the two million who visited during the first five months of 2019.

"Definitely, the spike in several South-east Asian countries is dampening expectations through the end of the year, not just because of the current outbreak and restrictions but also the uncertainties about the variant," Mr Roberto Herrera-Lim, managing director of business risk advisory Teneo, told ST.

Mr Alphonsus Widjaja, chairman of the Indonesian Shopping Centre Management Association, said tens of thousands are at risk of layoffs if the country’s lockdown extends past July 20, its initial expiry date.

Of the 280,000 people directly employed by the 350 or so malls that are members of his association, 30 per cent could lose their jobs. Indonesian malls and vendors employ 2.5 million in total, he said.

“If this drags on, there will be a lot of layoffs that will be unavoidable,” he said.