A new in-depth ADB report, Southeast Asia: Rising from the Pandemic, examines the extent of disruptions triggered by the coronavirus disease (COVID-19) crisis, highlights emerging growth opportunities, and recommends priority reforms that countries can adopt to better ensure an equitable and enduring recovery.
Poverty and inequality on the rise
The pandemic had staggering economic and social impacts in Southeast Asia, which disproportionately impacted women, youth, the poor, and other vulnerable groups. The pandemic pushed 5.3 million people in the region into extreme poverty in 2020, and 4.7 million more in 2021, compared with the no-COVID scenario. While recovery is underway, the region’s output level in 2022 is expected to remain at least 10% below the baseline output level in the absence of COVID-19
As economies are emerging from the crisis, an uneven recovery raises concerns of deepening divides on jobs, income, and education. Skills depreciation amongst laid-off workers due to prolonged periods of unemployment could hamper longer-term employment prospects, particularly among low-skilled workers. The massive reallocation of jobs caused by accelerated digitalization is exacerbating skills mismatch. Similarly, pandemic-induced school disruptions have intensified inequality, disproportionately disadvantaging students from poor households with scant resources for digital learning. Without urgent intervention, the report warns that the pandemic could worsen poverty and disparities, even as Southeast Asian economies regain their footing.
Risks to recovery
The report notes a number of risks to the region’s recovery, including the emergence of new COVID-19 variants, supply chain disruptions, and the tightening of global interest rates. These risks are compounded by Southeast Asia’s vulnerability to the impacts of climate change, as natural disasters become more frequent and cause more damage and reconstruction
Crisis as a catalyst
Despite the significant headwinds faced by Southeast Asian economies, one silver lining is the growing moment for build back stronger. According to the report, the crisis has given impetus to countries to build a more sustainable economy by strengthening social assistance, competitiveness, and support for small enterprises, among others.
To boost human capital growth, countries need to adopt measures to improve education systems and scale up jobs training. It is also critical to use technology to modernize small enterprises and enhance the efficiency and integration of supply chains.
A robust recovery also requires better health care to increase labor participation and productivity. The report says investing 5% of gross domestic product in health could boost a country’s growth prospects by 1.5%.
With Southeast Asian nations facing fiscal constraints, the report recommends that policymakers expand domestic revenue by strengthening tax administration and better manage debts and deficits.
Given tourism’s large share in the region’s economy, the report recommends that governments take steps to reshape the sector to boost sustainable and inclusive development, such as moving away from mass tourism toward high-value and low-density tourism. It’s also important to make sure women and other vulnerable groups are not left behind in the industry’s recovery, the report says.
Source: Asian Development Bank
