Update Country Report Maldives 11 May 2020

Event

In the week beginning May 4th 15 countries in Asia recorded an increase in new coronavirus (Covid-19) infections, up from eight countries the previous week. The largest increases were in India, Pakistan, Bangladesh, Singapore and Indonesia.

Analysis

Several countries have had to extend or tighten restrictions after failing to bring the coronavirus fully under control, and this has led The Economist Intelligence Unit to downgrade our forecasts for those countries. Japan, for example, was forced to extend its state of emergency until end-May. India extended its lockdown until May 17th, and although some measures were relaxed at end-April, high-frequency indicators suggest the economy has yet to pick up.

In China, new infection clusters were detected on May 11th in the northern provinces of Inner Mongolia and Jilin, as well as Hubei, where the virus originated. Authorities have reimposed quarantine in those areas. South Korea reported 34 new cases on May 10th, after the country eased social-distancing restrictions on May 6th; this may lead some schools to continue with online teaching for a period.

Most governments imposed restrictions at end-March, meaning that they will not fully translate into economic data until April. Trade figures are among the first indicators to have been released for that month. Exports from South Korea and Japan contracted sharply, while China's exports unexpectedly grew, although we expect the rebound to be temporary. We forecast demand in key markets, such as the US and the EU, to collapse in the second quarter as recessions deepen there.

Most countries in Asia will suffer sharp economic downturns in April-June, when the full impact of containment measures will be felt. We expect unemployment to rise sharply during this period, with the services sector set to suffer most. Governments are stepping up their responses to cushion the anticipated slowdown, in addition to previously announced fiscal and monetary stimulus. Japan approved a supplementary budget of US$235.3bn on April 30th. Afghanistan approved a stimulus spending package of US$1.1bn (equivalent to 5-6% of GDP) on May 2nd. Myanmar released a plan on April 27th to reallocate up to 10% of the 2019/20 budget to economic relief efforts. Meanwhile, the Malaysian central bank lowered its main policy interest rate from 2.5% to 2% on May 5th.

Impact on the forecast

We now forecast Asia and Australiasia to record a 0.7% drop in real GDP in 2020, compared to our previous forecast of a 0.4% expansion.