Update Country Report Maldives 22 Jun 2020

• Coronavirus (Covid-19) infection trends were broadly unchanged from the previous week, although an acceleration in the number of cases in India, Nepal and China points to the risk of fresh outbreaks as countries continue to transition from lockdowns.
• As more economies in Asia exit lockdowns, tensions will emerge between central and local authorities over the pace and extent of easing, especially in countries with more devolved systems of government like Indonesia and India.
• In the week ahead, Mongolia's legislative election is set to see the ruling party return with a reduced majority. Asia's economic data will be dominated by inflation releases, with more countries slipping into deflationterritory.

Between June 14th and 18th, 12 countries in Asia saw an increase in new coronavirus cases compared with the previous week, up from 11 countries over June 7th to 14th. The countries which recorded the largest increase in infections were India, Nepal and China. However, an outbreak in China's capital, Beijing, appears to be diminishing, with only nine new confirmed cases reported on June 21st.

Singapore entered the second phase of its lockdown easing programme on June 19th. Although there were 1,200 new cases in the country in the week starting June 14th, that was lower than in the previous week, and the majority were in migrant worker dormitories rather than the general community. Retail outlets and sporting facilities were also allowed to restart operations with social distancing measures in place. The government has employed social distancing ambassadors to enforce the rules. It has also eased border restrictions slightly, pledging to increase approvals of return in the coming weeks for long-term pass holders. With the easing in restrictions, The Economist Intelligence Unit expects the government to move forward with the election in July.

Singapore has also rolled out a digital check-in system called SafeEntry that enables contact tracers to find close contacts of infected patients and is designed to be an improvement on an earlier Bluetooth app called TraceTogether that had a relatively low accuracy rate and drained users' phone batteries. It is compulsory for people to check in on SafeEntry before entering workplaces, schools, healthcare facilities, malls and other places where people may come into close proximity with one another. However, it has drawn criticism over data privacy concerns. Several countries in Asia have introduced mobile-phone based apps to support tracing, including Australia, India, China and South Korea, albeit with limited success.

Centre-local tensions

The phasing out of lockdowns elsewhere is giving rise to tensions between central and local governments. In relatively decentralised Indonesia, for example, regional governments have been taking variegated approaches. The tourist island of Bali has been among the most eager to ease restrictions, yet others have backed more stringent measures in line with the "partial lockdown" advised by the national authorities. A similar dynamic has been observed across India's states, depending on the extent of local outbreaks and political relations with the central authorities. India's outbreak has been concentrated in the states of Maharashtra and Tamil Nadu, alongside Delhi.

Politically centralised countries appear to hold several advantages in terms of pandemic control, and we have written previously about the likelihood that the coronavirus will encourage a resurgence of the "big state" within Asia. Yet, excessive centralisation also poses risks, such as in the event the central executive is ineffective; in this case, local administrations can act as a counterbalance.

The week ahead

Mongolia will go to the polls on June 24th, marking the second election held in Asia since the pandemic's emergence. We expect the ruling Mongolian People's Party (MPP) to be returned with a significantly reduced parliamentary majority. The government's decision to close Mongolia's land border with China in late January helped to limit the coronavirus spread, but the resulting disruption to trade has had a heavy economic impact: China is the destination for more than 90% of the country's (predominantly mineral) exports. A reduced parliamentary majority will complicate Mongolian policymaking and points to more clashes between the MPP and the opposition over recent corruption scandals.

The China-India border dispute continues to simmer, following the deadly clash on June 15th. Although we evaluate the risk of a further escalation in the conflict to be low, economic ties between the two countries will become more complicated; Indian efforts to restrict Chinese inward investment were already under way before the clash, and consumer-led efforts to boycott prominent Chinese brands now seem likely. The episode is set to push India strategically closer towards the US and its allies, given its military imbalance with China.

In terms of economic data, inflation data will dominate this week, with May releases due from Hong Kong, Macau, Malaysia, Singapore and Japan. More countries across the region have seen consumer price inflation move into negative territory, with broad demand weakness and the collapse in oil costs acting to offset still rising food prices. Interest-rate decisions will be forthcoming from New Zealand, the Philippines and Thailand. Central banks, at least in developed Asian economies, are likely to pause on further rate reductions, owing to limited policy space and a desire to observe data as economies reopen. China's benchmark loan prime prime rate rate was also unchanged at its monthly announcement on June 22nd.