Economic Growth Records Historic Contraction, Better Outlook in 2021. Illustrative photo apec.org

SINGAPORE — Economic growth in the APEC region declined by 3.7 per cent in the first six months of 2020 and is expected to contract by 2.5 per cent for the whole year, or equal to an output loss of US$1.8 trillion.

This will be the first time that the region’s economy will contract in three decades, according to a report issued on Monday by the APEC Policy Support Unit .

“APEC was formed more than 30 years ago and has seen economic recessions, financial crises, commodity price volatility, pandemics and terrorist attacks. Yet, in terms of economic losses, this has been a year like no other,” explained Dr Denis Hew, Director of the APEC Policy Support Unit.

Unemployment rates among APEC economies have surged due to the economic fallout from COVID-19, averaging 4.8 per cent as of September 2020, with more than 74 million people looking for work, while consumption, trade and investments have reversed to contractions that are bigger than expected.

Household consumption shrunk by 7.1 per cent during the first half of the year from an average growth rate of 3 per cent in the first half of 2019. Investments also contracted by 11.2 per cent, following modest growth of 1.1 per cent during the same period last year.

Growth in the volume of merchandise exports fell by 6.2 per cent and imports recorded a sharp decline of 7.2 per cent in the first half of 2020, down from tepid growth in the first half of 2019.

“Trade performance in the APEC region was adversely affected by the combined impact of the temporary closure of borders, disruptions in global supply chains, and persistent trade and technology tensions, ” Dr Hew added.

Positive contribution to growth comes from government spending with an increase of 2.8 percent in the first half of 2020, reflecting fiscal measures implemented by economies to provide support to various sectors, in particular to bolster the health system, and to provide targeted liquidity support to households and businesses, including small businesses.

Dr Hew highlighted that there are already signs of recovery around the APEC region, especially coming from economies that were able to curb the spread of the virus early on and have reopened their economies, as well as improved manufacturing activities. These green shoots bring growth projections of 5.2 percent in 2021, reflecting an economic rebound for the region.

The recent APEC Regional Trends Analysis emphasised the need for APEC economies to continue deploying fiscal and monetary support measures so that health systems remain able to cope with continued, and for some economies, resurging or rising cases of infection. The report also recommends member economies to introduce, implement and enforce structural reforms to support recovery in the medium to long term.

“Regional cooperation should take a central role in economic recovery,” said Dr Rebecca Sta Maria, APEC Secretariat’s Executive Director. “APEC’s new post-2020 vision could serve as a guide for member economies to build a more resilient and inclusive region.”

Leaders and ministers from APEC’s 21 member economies will convene virtually this week, led by Malaysia as the host of APEC 2020, to address the challenges of the pandemic in the region and to pave the road to recovery and build back better. VNS