The ASEAN economy is suffering a slowdown in economic growth. Among the six countries that have published quarterly GDP growth data, five experienced negative GDP growth in the first two quarters of 2020, and among them three experienced negative growth as early as in the first quarter of 2020.
As the largest economy of ASEAN, Indonesia’s GDP growth eased from 4.97% to 2.97% in the first quarter of 2020. A more significant decline was seen in the second quarter when the GDP growth rate turned negative to -5.32%. During the first quarter, Indonesian exports were largely unaffected. Together with a mild dip in imports in February, the economy recorded a trade surplus. The decline in imports sustained for the large part of the second quarter.
Thailand is ranked the second largest economy in ASEAN in terms of total output and arguably suffers the most from COVID-19 when compared to its ASEAN peers. In the last quarter of 2019, Thailand’s GDP growth rate was 1.5%. However, GDP growth in Thailand reached the negative territory at -2.0% in the first quarter of 2020 and the decline widened significantly to -12.2% in the second quarter. The unemployment rate, on the other hand, remained at a low level with only a slight increase from 1% to 1.1% in the first quarter of 2020. The low unemployment rate of Thailand in the first quarter was supported by strong exports. Thailand’s exports had recorded a continuous increase from December 2019 to March 2020. Meanwhile, imports first decreased in February 2020 but recovered somewhat in March. However, in the second quarter, both exports and imports began to decrease, with imports suffering a steeper drop. Consequently, despite a trade deficit in January, there were notable trade surpluses in the following months.
As the most wealthy and developed country in ASEAN, and despite its initial success in containing the disease, the economy of Singapore also worsened along with the rest of the world. In the second quarter of 2020, Singapore’s GDP declined by 13.2% due to the strict lockdown measures imposed by the government. The construction industry has been severely affected by the lockdown, with the value of contracts awarded in Singapore during the first and the second quarters dropped by 26.3% and 21.3% respectively as compared to 2019. The unemployment rate rose sharply to 2.9% in July 2020 from 2.4% in June 2020, and this trend is expected to continue due to the lagged impact on the economy. Although COVID-19 did not seem to have much impact on Singapore’s exports in January, this was due to a lower baseline caused by a significant decline (as much as 8%) in February. In March, exports rebounded slightly and it’s not until April when exports began to show signs of decline. Meanwhile, the drop in in imports to Singapore has been more remarkable. Imports have been lingering at low levels since February, especially in the second quarter. The balance of trade in Singapore dropped drastically in January and February before reverting to its normal surplus level in March. The trade surplus increased to an even higher level in the second quarter.
For Malaysia, after the outbreak of COVID-19, growth in the first quarter of 2020 first dropped from 3.6% to 0.7% before plunging to -17.1% in the second quarter. In addition, there was a sharp jump in unemployment in May, with the unemployment rate reaching 5.3%. Similar to Singapore, Malaysia’s exports and imports started to shrink in February 2020. While the export value decreased by 11.5%, the import value fell even more, by 14.2%, causing the trade balance in February 2020 to go up slightly. After a relatively stable import performance in the subsequent two months, imports fell sharply in May and June 2020. Malaysia reached the highest trade surplus in history in July 2020.
The Philippines is another economy that has experienced a sharp fall in GDP growth among ASEAN countries. GDP growth in the Philippines plunged from 6.7% to -0.7% in the first quarter, and it further dropped to -16.5% in the second quarter. The unemployment rate of the Philippines was 5.3% in the first quarter of 2020. In the second quarter, its unemployment rate spiked to 17.7%. Trade data also reveal a grim picture of the Philippines economy, total trade volume reached a trough in April 2020, dropping to only 40.2% of the total trade volume in the same month last year. It is noteworthy that trade deficit is historically common in the Philippines, and the magnitude of trade deficit during COVID-19 is not as noticeable as in 2019.
In the first quarter of 2020, Vietnam’s GDP growth decreased significantly from 6.79% to 3.82%. Not unlike its ASEAN peers, Vietnam’s GDP growth also fell in the subsequent quarter albeit at a much smaller magnitude. The GDP growth in the second quarter was 0.36%. As for the labor market, the unemployment rate of Vietnam was 2.22% in the first quarter 2020 but rose to 2.73% in the second quarter. Oveall, the impact is still small relative to other ASEAN countries. The outburst of COVID-19 in January 2020 led to an excessive plunge in external trade. On average, monthly exports of Vietnam in the first quarter of 2020 were below historical values. Starting from May however, both imports and exports have been gradually increasing.
For the rest of the ASEAN countries, namely, Brunei, Cambodia, Laos, and Myanmar, due to data limitations, we cannot accurately gauge the economic impacts of COVID-19 on these countries. With the deceleration of economic growth in the major ASEAN economies and the slow recovery of trade, the pressure brought by high unemployment is prominent and will remain at a high level for a relatively long period of time. For countries that supply foreign labor, they should be prepared for cross-country transmission of unemployment.