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Article: EM Asia mid-year outlook

Rocky start, bumpy recovery.
Policies and reforms key to the investment outlook.
12 June 2020
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    Key takeaways

    • EM Asia saw a sharp slowdown in Q1 amid the pandemic shock. Further weak-ness in Q2 is likely as containment measures were in full force, except China where Q1 likely marked a trough and Q2 should record a notable qoq expansion
    • Following China (first in, first out), other parts of EM Asia have also started to reopen with easing restrictions. Several high frequency indicators have either stabilised at low, well-below normal, levels or become less bad lately
    • Industrialised Asia leads the return to normalcy, helped by their stronger healthcare system capacity and policy space
    • Policy responses to the COVID-19 shock have been significant with better fiscal and monetary policy coordination. While a material deterioration fiscal balances is expected this year, most EM Asia has policy space to do more given the relatively sounder starting points for public debt and current account balance vs. other EMs
    • The recovery path will likely largely hinge on the (health) institutional response and the ramifications on domestic demand (as supply is slowly restored); global macro backdrop; and domestic policy actions and reforms
    • The emergence from the lockdown will be gradual and the recovery will be bumpy, amid external risks as well as corporate solvency, labour market and financial stability concerns