AGL 5.60 Decreased By ▼ -0.18 (-3.11%)
ANL 8.90 Increased By ▲ 0.02 (0.23%)
AVN 76.85 Decreased By ▼ -2.07 (-2.62%)
BOP 5.26 Decreased By ▼ -0.02 (-0.38%)
CNERGY 4.63 Decreased By ▼ -0.07 (-1.49%)
EFERT 81.27 Decreased By ▼ -0.33 (-0.4%)
EPCL 50.08 Decreased By ▼ -0.83 (-1.63%)
FCCL 13.16 Decreased By ▼ -0.22 (-1.64%)
FFL 5.69 Decreased By ▼ -0.03 (-0.52%)
FLYNG 7.07 Decreased By ▼ -0.08 (-1.12%)
FNEL 4.79 Decreased By ▼ -0.03 (-0.62%)
GGGL 8.80 Decreased By ▼ -0.10 (-1.12%)
GGL 14.55 Decreased By ▼ -1.33 (-8.38%)
HUMNL 5.69 Decreased By ▼ -0.08 (-1.39%)
KEL 2.63 Decreased By ▼ -0.03 (-1.13%)
LOTCHEM 28.60 Decreased By ▼ -0.45 (-1.55%)
MLCF 24.49 Decreased By ▼ -0.61 (-2.43%)
OGDC 72.43 Decreased By ▼ -0.02 (-0.03%)
PAEL 15.36 Increased By ▲ 0.01 (0.07%)
PIBTL 5.00 Decreased By ▼ -0.05 (-0.99%)
PRL 16.10 Decreased By ▼ -0.19 (-1.17%)
SILK 1.08 Decreased By ▼ -0.01 (-0.92%)
TELE 9.14 Decreased By ▼ -0.23 (-2.45%)
TPL 7.23 Decreased By ▼ -0.10 (-1.36%)
TPLP 18.61 Decreased By ▼ -0.34 (-1.79%)
TREET 21.68 Decreased By ▼ -0.32 (-1.45%)
TRG 136.71 Decreased By ▼ -4.44 (-3.15%)
UNITY 16.88 Decreased By ▼ -0.14 (-0.82%)
WAVES 9.86 Decreased By ▼ -0.04 (-0.4%)
WTL 1.41 No Change ▼ 0.00 (0%)
BR100 4,225 Decreased By -29.6 (-0.7%)
BR30 15,518 Decreased By -214.7 (-1.36%)
KSE100 42,150 Decreased By -243.4 (-0.57%)
KSE30 15,588 Decreased By -75.7 (-0.48%)
Business & Finance

Delta blow knocks wind out of Asia's economic recovery

  • The rapid spread of the highly infectious Delta variant of the novel coronavirus and low vaccination rates have caught much of the region off-guard
Published August 24, 2021
Follow us

TOKYO: Asia's robust economic recovery from last year's coronavirus low is losing momentum as a surge in COVID-19 cases sees shops empty again and factories close, dimming prospects for corporate profit growth after a blockbuster half year.

The rapid spread of the highly infectious Delta variant of the novel coronavirus and low vaccination rates have caught much of the region off-guard, especially in emerging markets, even as economies in Europe and North America reopen.

"It's clear that economies across the region are suffering more from COVID-19 than they previously did. The biggest factor is that Asia is poorly vaccinated," said Rob Carnell, Asia-Pacific head of research at ING in Singapore.

While year-on-year corporate and economic indicators continue to show strong recovery, flattered by comparisons with 2020's sharp declines, quarter-on-quarter indicators reveal flagging momentum.

Asia stocks stagger up from lows, mood fragile

Asia's biggest firms are likely to post their first quarter-on-quarter profit decline in six quarters in July-September, falling 6.19%, showed a Reuters calculation based on Refinitiv Eikon analyst data of 1,069 companies with market capitalisation of at least $1 billion.

"There's no mistake there will be a slowdown in the third quarter," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

In the near-term, much depends on vaccination progress in Southeast Asia - a major production base - and whether China takes extra steps to support its economy, Fujito said.

Vehicle sales in China, the world's second-largest economy, slipped in July versus the same month last year, falling for a third consecutive month amid virus outbreaks and a global semiconductor shortage which is curbing output.

Toyota Motor Corp, the world's largest automaker by sales volume, said last week it would cut September production by 40% from its previous plan due to the chip crunch, though it retained production and sales targets for its fiscal year.

Regarding broader parts supply, Toyota executive Kazunari Kumakura said, "The spread of the coronavirus and lockdowns in Southeast Asia had a major impact."

SUPPLY HEADACHES

In Southeast Asia, soaring COVID-19 cases and subsequent lockdown measures have hit economic activity in both the services and manufacturing sectors.

Factory activity in the region contracted in July at the fastest pace since June last year, IHS Markit data showed.

"That's quite a strong signal that economic momentum in Southeast Asia will slow in the third quarter," said Rajiv Biswas, Asia-Pacific chief economist at IHS Markit in Singapore.

Delta outbreaks in Southeast Asia have caused supply chain headaches for many of the world's largest manufacturers, many of which rely on auto parts and semiconductors made in low-cost bases such as Thailand, Vietnam and Malaysia.

Mitsubishi Motors Corp Chief Financial Officer Koji Ikeya said the COVID-19 resurgence will depress demand, the chip shortage would have a lengthy impact on production, and prices of steel and other materials are set to rise.

"Because of those risks, the environment surrounding us remains unstable," Ikeya said.

BASE EFFECT

In Malaysia and Vietnam, lockdown measures and cases of infection have forced factories to suspend operations.

"Of course, governments are trying to put in place better protection for essential workers ... for example, giving them priority for vaccination," said IHS Markit's Biswas.

The extent of any economic slowdown in Asia will not be fully known until governments release third-quarter gross domestic product (GDP) estimates later this year.

Asian economies that were moving from a state of relative openness to lockdown will probably see their GDP contract quarter-on-quarter, said ING's Carnell.

ING has already trimmed its growth forecasts for Thailand, Malaysia, Indonesia, the Philippines and Australia, he said.

"You're seeing 30-40% (year-on-year) export growth in many cases but you've got very strong base effects working through those things," Carnell said.

Comments

Comments are closed.

Delta blow knocks wind out of Asia's economic recovery

PM Shehbaz condemns assassination attempt on Pakistani envoy in Kabul

Saudi Arabia extends term of $3bn deposit: SBP

Rupee remains unchanged against US dollar

Giving the govt a chance, sit with us and call elections: Imran Khan

Oil ticks up ahead of OPEC+ meeting, EU Russian oil ban

OMCs take a hit as petroleum sales drop in Pakistan

Pakistan's pitches from 'dark ages', says cricket chief Ramiz

India to continue buying Russian oil: ministry source

Imran Khan says Senator Azam Swati treated in 'vengeful manner'

Qurat ul Ain Fatima appointed new ECP spokesperson