S'pore economy would be least affected in South-east Asia if Covid-19 infections spike: ADB

SINGAPORE - In the worst case scenario of a spike in Covid-19 cases, the impact on Singapore's economy would be limited as compared to other countries in the region, the Asian Development Bank (ADB) said in a new report.

The region is expected to grow by 5.1 per cent this year, but the spread of the Omicron virus variant could deduct up to 0.8 percentage points off this estimate, according to the report which was issued at the South-east Asia Development Symposium, held virtually, on Wednesday (March 16).

If the Omicron variant spreads and disrupts demand and the supply of workers who will either get sick or be required to isolate after exposure to the disease, it would affect economic activity.

All economies in the region would post a weaker growth, with Vietnam, Thailand, Malaysia and Laos most heavily affected.

The varying impact of Omicron on growth forecasts range from downgrades of 1.9 points in Vietnam and 1.1 points in Thailand, to just 0.2 point in Singapore, should Covid-19 infections spike this year.

This is due to Singapore's strong health system, Covid-19 protocol, and high vaccination rate, said Mr James Villafuerte, senior economist of the South-east Asia regional department at ADB, in response to questions from The Straits Times.

"(Singapore is) also digitally enabled and can produce even with lockdown... the vaccination rate in Singapore, including booster shots, are also one of the highest in South-east Asia and it's factored in as part of the mitigating factors," said Mr Villafuerte.

The region's economic output is likely to be down by 10.3 per cent this year against a baseline without the Covid-19 pandemic, said ADB.

Among the most affected are unskilled workers, those in the retail industry, the informal economy, as well as small businesses without a digital presence.

Reduced disease burden could enhance the growth prospect in South-east Asia by about 1.5 percentage points this year compared to the baseline scenario for the simulation, which replicates the forecasts from the Asian Development Outlook supplement issued in December 2021 by ADB.

In general, the increased gross domestic product growth stems from higher health spending, higher labour force participation rate, as well as increased labour productivity from better health of workers in the region, the ADB report stated.

Second Minister for Finance Indranee Rajah, who spoke at the virtual symposium, addressed the need to strengthen supply chains and international trade, and scale up finances for sustainability in the region.

"The pandemic has accentuated the role of logistics as a critical enabler of the world's economy. We will need to collectively address disruptions in global supply chains and uphold an open, stable and rules-based trading system," said Ms Indranee, adding that the current global supply network should be built on to strengthen trade and supply chain connectivity sustainably.

She also highlighted the need to catalyse sustainable infrastructure, as it is critical for the region to build sustainable and resilient infrastructure with more adverse weather patterns threatening low-lying coasts.

Mr Masatsugu Asakawa, president of ADB, said in a statement that the organisation will work with policymakers on efforts such as streamlining regulations for improved business competitiveness.

He added: "We encourage South-east Asian governments to invest in smart, green infrastructure and adopt technological innovations to reinvigorate economic growth."