IBEX International Talk Series: Economic Outlook – Post COVID-19 Pandemic

Is 2021 a year of transition? Charlie Lay shared some points of his in-depth global and Asian economic outlook before and after the COVID-19 pandemic.

The COVID-19 pandemic is still posing significant impacts to every part of human life, especially the socio-economic ones. For that reason, the International Business program of BINUS BUSINESS SCHOOL considered this topic as worth discussing.

IBEX International Talk Series

They held an IBeX International Talk Series on the “Economic Outlook – Post COVID-19 Pandemic”. The event invited Mr. Charlie Lay as a guest speaker. He is a Director – senior economist, and FX strategist at CommerzBank based in Singapore. Acting as the moderator was Mr. Kim Moo Kung of Binus University. The purpose of this event was for the students to better understand the existing and upcoming global and Asian economic outlook.

2021: A Year of Transition – The World in Repair

Mr. Charlie Lay shared his insights about the recent global and Asian economic outlook. He wrapped it into “2021 – A Year of Transition”, which consisted of six sections.

#1 – Global Backdrop

In 2020, among the major economies in the world, the global, the US, and the EU (European Union) growth were severely contracted by -3.5%, -3,4%, and -7.3%, respectively. Interestingly, only China managed to grow by 2.3%.

The ideal range for global growth is 2 to 4%. If anything is below 2%, it means a global recession, and if anything is above 4%, it means a very strong growth.

As for 2021, there is a global economic rebound, mainly due to the vaccination help, but it is still uneven.  Several factors have triggered this uneven recovery, including an abrupt end to the last Bull Run, the accentuation of some trends during the crisis, and the technology revolution.

#2 – COVID’s Shocks

One of the best ways to make sense of the crisis is by considering COVID-19 as four serious shocks. They are the supply-side shock (the revamp of the supply chain), the demand shock (related to unemployment rate), the health shock (concerning vaccinations), and the financial shock.

#3 – The Fed and the Markets

Three consequences of liquidity injection are: 1) elevated market prices, 2) a V-shaped recovery in the stock market but not all the real economy, and 3) rising inflationary expectations.

#4 – China, Asia, and the ASEAN Outlook

China had to manage a GDP growth of 2.3% in 2020 and has a projected 8% growth in 2021. Due to the country’s quick stringent lockdown, it has set the foundation for recovery. This country is somewhat hesitant in giving monetary and fiscal boosts (15%) compared to other developed economies. Deleveraging is their key theme to maintain the rebound and pursue sustainable growth.

The overall outlook of Asia’s growth is experiencing a bounce back after a deep recession. The NIEs (newly industrialized economies) are doing especially well due to the electronic sector (high demand for chips and semiconductors).

After last year’s contraction, there is a growth forecast for ASEAN countries in 2021 or after the pandemic. There will be a differentiation of growth for each region.

#5 – US-China Relationship under the Biden Administration

The US-China relationship is crucial since it tends to dominate Asian and global affairs in more forthcoming decades.  We can see their relationship from three points of view, i.e. China’s viewpoint, the US’s viewpoint, and the rest of the world or Asia’s viewpoints. To simply put it, there are three areas in the US-China relationship, i.e. confrontation, cooperation, and competition.

#6 – Key Risks

The following are some of the key risks of the global economic outlook after the pandemic for the coming years.

  • There may be more virulent strains of COVID. If the virus is increasingly and repeatedly mutated, there will be periodic lockdowns and thus bumpier recoveries.
  • If the Fed is too slow to act, it will overheat. It will lead to several implications like higher inflation, asset bubble corrections, and increased protectionism.
  • If the US-China tensions continue escalating, there will be unexpected accidents or confrontations between them.

There are indeed various intertwined global backdrops that influence the Asian economic rebound. Charlie Lay said that given the uncertainty of the COVID-19 pandemic, it is like walking in a long, dark tunnel. Let’s just believe that there is always a light at the end of it. ** (KTS)