## Divergent Recoveries in Asia: History is not Destiny

_IMF Blog, February 23, 2021_

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## Bibliographic details
- Authors: Davide Furceri, Jonathan D Ostry, Anthony CK Tan
- Published: February 23, 2021

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### Overview and key statistics
- Authors: Davide Furceri, Jonathan D. Ostry, Anthony C.K. Tan
- Date: February 23, 2021
- IMF’s World Economic Outlook Update: upgraded 2020 growth estimate by 0.7 percentage point from October forecast to a contraction of 1.5 percent.
- Projected regional output growth:
  - 2021: 7.3 percent
  - 2022: 5.3 percent
- Range of cumulative output losses (relative to pre-pandemic trajectory):
  - Close to zero in China, Japan, and Taiwan PoC
  - More than 20 percentage points in the Philippines
  - Even 30 points in East Timor
- Reference baseline for divergence comparison: IMF’s pre-pandemic (October 2019) forecasts and current cumulative GDP growth projections for 2020, 2021, and 2022.

### Findings — why recoveries diverge
- Health factors
  - Early and stringent containment measures (examples: Australia, Vietnam) helped flatten the pandemic curve, avoid overwhelming medical systems, reduce fatalities, and lay the foundation for recovery.
  - Rollback of containment only after outbreak stabilization and strong testing/tracing regimes (examples: China, Korea) boosted confidence and supported stronger rebounds.
- Magnitude and effectiveness of policy support
  - Extensive monetary and fiscal support mitigated economic effects of containment (notable: Japan, New Zealand).
  - Targeted fiscal measures (examples: consumption coupons in Korea; cash transfers to casual workers in Australia) supported incomes, reduced infections, and enabled higher medium-term growth.
- Economic structure and sectoral dependence
  - Heavy dependence on tourism and contact-intensive services amplified losses; tourism suffered most.
  - Informal and migrant workers, particularly women and youth, were disproportionately affected due to diminished opportunities and limited social safety nets.
  - Countries highly reliant on tourism (examples: Pacific islands, Cambodia, the Philippines, Thailand) experienced stronger negative impacts.
- Other structural factors
  - High informality, concentrated economic activity, weak transportation infrastructure, limited health sector capacity, and poverty complicated containment enforcement and targeted support (example: Philippines, with high concentration in the Manila metropolitan area).

### Implications and scarring
- Despite early recoveries in parts of Asia-Pacific, aggregate output losses from the pandemic remain significant even under projected rebounds.
- Labor market deterioration: weakened labor force participation and diminished job prospects for youth and women indicate likely significant scarring.
- Divergence is especially sobering for Pacific islands and other low-income countries, where lives and livelihoods depend on additional international support.

### Policy priorities — the way forward
- Vaccine access and therapies
  - Ensure vaccines are widely available to end the pandemic everywhere.
  - Speedy distribution and availability of effective therapies are key to stronger consumption, investment, and employment recoveries.
  - Support to developing countries in funding, logistics, and administration is crucial to close gaps between developing and advanced economies.
- Continued support for workers and businesses
  - Policies should continue until recovery is entrenched and private domestic demand is self-sustaining.
  - High uncertainty warrants a slower withdrawal of support while remaining vigilant about debt sustainability and financial sector risks.
- Economic transformation and reallocation
  - Stimulate private sector demand as containment eases; replace broad sectoral assistance with measures that build greener, more inclusive, resilient, and digital economies.
  - Use “trampoline” policies (job counseling and retraining) alongside safety nets to protect the most vulnerable and encourage reallocation.
- International financial support and cooperation
  - Financial assistance from the international community is needed to reverse divergence between rich and poor countries.
  - Many low-income economies, including Pacific island countries, will require financial assistance for the foreseeable future.
  - Global cooperation via the G-20 Common Framework can help clear a path for countries to restructure unsustainable debt and grow.

*IMF Blog — “Divergent Recoveries in Asia: History is not Destiny” — February 23, 2021*

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## References

- [World Economic Outlook Update](https://www.imf.org/en/Publications/WEO/Issues/2021/01/26/2021-world-economic-outlook-update)
- [October](https://blogs.imf.org/2020/10/21/engines-not-yet-in-sync-a-multispeed-recovery-in-asia/)
- [fatalities](https://blogs.imf.org/2020/06/02/how-the-great-lockdown-saved-lives/)
- [targeted support](https://www.imf.org/en/Publications/WP/Issues/2020/10/16/COVID-19-and-Inequality-in-Asia-Breaking-the-Vicious-Cycle-49807)

_Source: https://www.imf.org/en/blogs/articles/2021/02/23/blog-divergent-recoveries-in-asia_