Speech

Keynote Speech at Boao Forum for Asia

May 8, 2020

Ladies and gentlemen, it is a real pleasure for me to join you today for the online launch of the Boao Forum’s inaugural flagship report and the symposium on “Asian Development Prospects and Challenges Under the Pandemic.” I would like to thank Chairman Ban Ki-Moon, Vice Chairman and Governor Zhou Xiaochuan, Secretary General Li Baodong, and all the organizers at the Boao Forum, as well as all of you who are participating virtually in this important event.

I was asked to make some remarks on the global and Asian economic outlook, and I am glad to do so. But before I begin, I would like first to acknowledge and thank all the frontline workers—doctors, nurses, and first responders—who are working so hard to keep us safe as the world continues to fight the COVID-19 pandemic. We owe them a true debt of gratitude for the sacrifices they are making.

Let me move to the global outlook.

The pandemic is inflicting high and rising human costs worldwide. Protecting lives has required lockdowns and widespread closures of activities to slow the spread of the virus. The health crisis and the associated lockdowns are also having a severe impact on economic activity. As a result of the pandemic, our latest projections show the global economy contracting sharply by 3 percent in 2020.

Looking at advanced economies, economic growth as a whole is projected to be -6.1 percent in 2020. Most advanced economies are forecast to contract this year, including the United States (-5.9 percent), Japan (-5.2 percent), the United Kingdom (-6.5 percent), and Germany (-7.0 percent).

Emerging market and developing economies also face a range of challenges, including the health crisis, a severe external demand shock, a dramatic tightening in global financial conditions, and plunging commodity prices. Overall, these economies are projected to contract by 1.1 percent in 2020. If China is excluded from the calculation, the growth rate for the group of EMDEs is expected to be even worse, at -2.2 percent.

Let me turn to Asia.

The impact of the coronavirus on the region will be severe, across the board, and unprecedented. Indeed, we are forecasting that Asia’s economic growth will come to a standstill in 2020. This is worse than the Global Financial Crisis, when growth slowed to 4.7 percent. It is even worse than the Asian Financial Crisis, when growth slowed to 1.3 percent. In fact, Asia has not experienced zero growth in the last 60 years.

Why is the region facing such an unprecedented slowdown?

Well, first of all, unlike the global financial crisis, Asia’s real sector—and especially the service sector—is being hit hard. Second, unlike the Asian financial crisis, the slowdown of external demand outside Asia is much more severe. Third, increasing trade integration, as evidenced by today’s highly developed supply chains, means that production slowdowns in any one country transmit rapidly and widely to other parts of the world, and particularly within Asia. And as a result, while some Asian countries were hit very hard during the previous crisis, the downturn today is much more widespread.

And more importantly, this unprecedented outlook is subject to an unprecedented amount of uncertainty. This means that the extent of the economic fallout depends on factors that interact in ways that are hard to predict, including the course of the pandemic and the containment efforts. But risks of a worse outcome predominate.

For example, there is a risk that continued containment efforts may be needed if there are waves of infections. These waves could lead to a longer and sharper downturn than the current forecast.

Other examples include lingering uncertainty about contagion, confidence failing to improve, and business closures, leading to longer-lasting supply-chain disruptions and weakness in demand.

Now, what about the policy response?

In short, a full arsenal of policies is needed, given the severity of the economic shock. Here, I would like to highlight the following points that are relevant for Asia’s economies.

First, policymakers must ensure adequate support and protection in the healthcare sector— as well as for measures that slow contagion.

Second, policymakers should aim to target support for the hardest-hit households and firms. These policies need to protect people, jobs, and industries directly, not just through financial institutions. Policies must be carefully calibrated to reduce inequality.

Third, policies should remain responsive and nimble. Many countries in Asia have already responded proactively by mitigating the adverse economic impact and by positioning themselves strategically for economic reopening and recovering. Faced with tremendous uncertainties related to the pandemic and the heterogeneity of Asian economies, policies also need to be nimble and adaptive to achieve their objectives most effectively.

In addition, countries should also seek and utilize bilateral and multilateral swap lines and financial support from multilateral institutions in response to external pressures,. There can also be a role for capital flow measures to secure external sector stability.

Last but not least, strong global and regional cooperation is needed to complement national efforts. The virus does not respect borders, and this crisis is like no other. No country can succeed by itself. Only by working together and cooperating on both the health and economic fronts, will we be able to move forward and help the global and Asian economies get back on track.

With these remarks, I greatly look forward to our discussion today, and wish great success to the Boao Forum in its launch of the inaugural flagship report and the symposium.

Thank you!