Asia going from containment success to slow vaccine rollouts: the Philippines, Thailand, and Malaysia most exposed
Asia has been a poster child for its success in pandemic containment. This is specially the case of East Asia, where an earlier resumption of manufacturing activities led to an export-driven recovery from the second half of 2020. The strength has carried into 2021 as global demand recovers, with Hong Kong, South Korea, and Taiwan all reporting surprisingly strong Q1 GDP growth. But Q2 is set to be a lot more challenging. The renewed wave of infections, starting from India and spreading rapidly within the region, shows that the pandemic remains a significant threat to the economic activities, especially if we consider the very slow vaccine rollout in the region.
Supply shortage used to be a main cause for the slow vaccination drive in Asia, but this should no longer be the case for most with a few notable exemptions: Indonesia, Thailand, Taiwan, the Philippines, and Vietnam have still failed to acquire the necessary dosages for mass immunization. That said, demand remains weak from the public. Apart from Singapore, Mainland China, Hong Kong and Australia, most Asian economies have less than 10% of its population inoculated. Skepticism over the newly developed vaccines seems to be a common reason for the hesitance globally. But it is even more so in Asia where a more effective containment has led to a lower sense of urgency.
Based on the daily average vaccination rates in the past month, we made a projection on the timeline to attain mass immunity for Asian Pacific economies. Our results show that that only Singapore and Mainland China will be able to achieve herd immunity within 2021, whereas Hong Kong, Australia, and South Korea will complete in H1 2022. For those still struggling with securing enough doses, the target could only be met in 2025 and beyond at current speed. The good news is the actual completion date could be much earlier as we should be entering into a phase of an excess supply later this year with the possible lifting of export restrictions. This is clearly the case for the vaccines manufactured in the US and EU. That said, the bottlenecks in distribution will remain.
Still, some economies can afford a slower vaccination progress while others cannot. To gauge the urgency for vaccination, we look into: a) their track record in pandemic containment; b) their dependence on international mobility. For the former, the Philippines is the worst and Indonesia second. For the latter, Thailand is most dependent and the Philippines second. Taking both into account, we think the Philippines, Thailand, and Malaysia are the most exposed to risks involved in the slow vaccination drive. In fact, the Philippines and Thailand cannot even speed up the drive due to supply constraints. Malaysia, albeit having less of a concern in terms of supply, is falling behind in distribution.
In short, the Asian recovery will remain uneven – and clearly more uncertain - with social distancing measures and cross-border restrictions remaining in place longer than expected, and longer than in the West as well. The divergence in vaccination rates can also feed into an unbalanced recovery within the region, especially as new waves are starting in a growing number of Asian economies. The broader economic reopening in the West that is built upon a much faster vaccine rollout, especially for the US and increasingly for the EU, could add to the divergence, making Asia look more fragile on its path to recovery and less favorable as an investment option.
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