Update Country Report Maldives 04 May 2020

Event

In the week beginning April 27th eight countries in Asia recorded an increase in new coronavirus (Covid-19) infections, down from nine countries the previous week. The largest increases were in India, Bangladesh, Pakistan and Singapore.

Analysis

Despite the high number of reported cases in India (42,505 as of May 3rd) and Pakistan (in excess of 18,000), China continues to command top position in the number of reported cases in the Asia region, with nearly 84,000. In the global context, this number is dwarfed by nearly 1.2m cases in North America, which remains the largest outbreak to date.

Nationwide lockdowns will remain in place for a large number of Asian countries in early May, although a few countries will join a growing minority in relaxing restrictions. These include Malaysia, India, Fiji and South Korea. However, border controls and some form of social-distancing measures are likely to remain in place across the region for the foreseeable future. In Malaysia restrictions were relaxed on May 4th, but businesses that involve large gatherings will remain closed, including cinemas, nightclubs and bazaars. Most sporting activities will remain restricted, as will religious gatherings.

As governments across Asia deal with the adverse economic effects wrought by the imposition of restrictions, policymakers are increasingly looking for creative ways to fund relief measures. On May 1st the Bank of Papua New Guinea (the central bank) successfully sold Kina1bn (US$290m) of so-called Covid bonds. Bank Indonesia (the central bank) purchased around US$11bn worth of government bonds from primary and secondary markets in late April in an attempt to support the government's financing needs. The government itself has already put a long-awaited capital relocation programme on hold. The Bank of Japan (the central bank) announced in late April that it would buy an unlimited amount of government bonds and quadruple its purchase of corporate debt. Other governments have unveiled additional fiscal packages; South Korea has approved a second supplementary budget, partly to fund emergency relief payments.

Impact on the forecast

We currently expect real GDP to contract by 0.4% in Asia and Australasia in 2020. There are considerable downside risks to this forecast, including the re-imposition of restrictions, particularly if governments restart their economies too early and trigger a spike in new infections. Border controls and quarantine measures on visitor arrivals are expected to be lifted gradually but could remain in place until a vaccine is found.