View of the traditional Pasar Baru market during the Covid-19 emergency restrictions in Bandung.
Algi Febri Sugita | SOPA pictures | LightRocket via Getty Images
With consumer spending in China continuing to lag behind the economic recovery from the pandemic, similar weakness in retail sales has been seen elsewhere in Asia.
“We are still seeing a recovery in private consumption in most parts of Asia, but it is slow and below pre-pandemic levels,” said Lloyd Chan, chief economist at Oxford Economics.
Chan said the “bumpy and rather uneven” recovery in consumer spending in the region was largely due to the ongoing pandemic, as sporadic outbreaks continued to occur in several Asian countries.
Often referred to as the “first in, first out” of the Covid crisis, China has been largely successful in keeping the resurgent waves of the coronavirus at bay. Still, despite government efforts to stimulate spending, the country’s economic recovery has been held back by sluggish retail spending.
Meanwhile, the upswing elsewhere in Asia has likely had a negative impact on consumer sentiment as well as mobility, said Taimur Baig, chief economist at DBS Bank in Singapore.
“As we saw last year, mobility is a very strong requirement for consumption because you sit at home and order a lot of things via e-commerce – but you still don’t spend the money you would if you did could go out regularly, “said Baig.
In North Asia, Japan’s Okinawa Prefecture is still in a state of emergency, while other areas – including Tokyo – are subject to priority preventive measures, information from the Ministry of Health, Labor and Social Affairs showed.
As long as there are mobility restrictions, as long as political support remains relatively soft, we will see a very sluggish recovery in consumption.
Chief Economist, DBS Bank
In Southeast Asia, Indonesia’s health minister said in June that parts of the country are running out of hospital beds as cases related to the delta variant of the Covid surge.
India, which has the second highest number of Covid cases in the world, had a total of over 30 million cases at the end of June. Until recently, the South Asian country had to contend with a devastating second wave as cases soared and overwhelmed the health system.
Asian governments have provided less fiscal and monetary support compared to their Western counterparts – and this will likely continue to weigh on the region’s economic recovery, Baig added.
“As long as there are mobility restrictions, as long as political support remains relatively soft, we will see a very sluggish recovery in consumption,” said the DBS economist.
Asia’s slow adoption of vaccinations
Compared to the developed countries of the West, most of the Asian countries have been slow to vaccinate their populations, mainly for reasons such as the lack of an excess of vaccinations.
Oxford Economics’ Chan said the company is placing “quite a lot of emphasis” on covid vaccination as a solution to a return to consumer spending in Asia.
However, Baig was not as optimistic, pointing out that most of Asia “is so low on vaccination rates that doubling or tripling that rate will not change anything significant”.
“You don’t necessarily see an increase in consumption at low vaccination rates, it has to reach critical mass and most countries in Asia are many, many months away from reaching critical mass,” said the DBS economist.
According to Our World in Data, as of July 1, only 12.65% of the Japanese population were fully vaccinated against Covid-19.
In Southeast Asia, countries like Indonesia and the Philippines both have only 5% or less of their populations fully vaccinated. Singapore is one of the regional outliers and on July 4th fully vaccinated nearly 37% of its population.
In contrast, both the US and the UK have already fully vaccinated more than 40% of their populations.