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The spread of COVID-19 has wreaked havoc all over the world. Economic instability is present everywhere. According to the IMF’s World Economic Outlook, the world economy will shrink by 8% in 2020. The reason being that following the spread of Coronavirus, strict restrictions were imposed on peoples’ movement, and lockdown prevailed all around the world. This led to global uncertainty, leading to a rise in inflation and unemployment level as most of the companies laid off employees expecting a deceleration in growth rates, a downtrodden international trade and fall in investment level.

Same is the case with Asian countries where movement control was imposed in February-March 2020 in order to curb the excesses of the pandemic virus that proved to be a deadly one. Strict lockdowns prevailed that caused people to speculate tough times ahead. As the origin of COVID-19 took place in Wuhan, China, the impact was greatly felt in the neighbouring Asian region. With China’s recent drive of regional connectivity through its OBOR (one belt one road) initiative, the Asian countries are in close socio-economic and political relations with China. Hence, stringent measures were taken in Asian countries to follow China’s suit in the imposition of lockdown.

This led to slow down in the economy of Asia. According to the IMF’s World Economic Outlook, the Asian economy will shrink by 1.6% for the first time in recent decades. The region’s economy is dependent on global supply chains and trade activities. Therefore, Asia is not expected to grow if the world economic environment is bleak. During the lockdown, the economic activity in the region fell by 12% per month according to rough estimates. With the recent ease in lockdown, the economic activity is expected to recover at 7% per month.

The reason for the slowness in recovery is due to the SOPs (Standard operating procedures) imposed by governments of Asian countries that ensure minimal inter-personal contact amongst people. Such measures have led to a downtrodden performance of the tourism sector and foreign remittances on which Asian economies overly rely.

The Asian financial market, in tandem with the global market, is expected to recover in the last quarter of 2020 conditioned upon the containment of the spread of COVID-19 pandemic. The virus has been thwarted to an extent, and the stock market has started to recover in almost all Asian countries. But there is apprehension that if the second wave hits the world, the bottom will fell out of the market again. So, we should expect growth in the Asian stock market in spurts until the vaccine is made available.

The supportive low-interest rates, accommodative expansionary monetary policy and contractionary fiscal policy along with lower inflation outlook and growth in demand for goods and services related to health, rubber gloves, medical equipment and sanitizing products are the factors that provide robust opportunities for the Asian market to recover in post-COVID-19 period. The only factor that is considered a nail in the coffin of financial markets is the resurgence in the pandemic.

Hence, at the moment, the policymakers should focus on restructuring health-related policies to hinder the spread of the virus. Also, the government should take measure to balk upon the overheating of the stock market. The risks associated with the Asian market is political instability, fall in global markets and slower than expected economic recovery. If the Asian countries’ government can prepare itself to fight such circumstances, then they will grow in a sustainable manner.

It is an understood phenomenon that after every trough in business cycles of growth, boom follows. All we ought to do is to prepare the right policies and follow the guidelines. Keeping in view the recent trends in the Asian economy, we can deduce that the economy will recover in the near future. The Asian countries’ government need to support the economic environment with their vigilant policy-making framework.

They must ensure that the interest rate remains low, there is macroeconomic stability prevailing, the monetary and fiscal policy are accommodative, that credit availability is smooth, inflation remains low, and political environment is stable. By taking these steps, we can say that the region’s economy will recover and perform well in the future. But the growth will be in spurts because of the defensive nature and risk averseness of investors. People are apprehensive about the re-emergence of the COVID-19 pandemic.

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