Factory activity throughout Asia has contracted sharply in March as the COVID-19 pandemic continues to spread globally. The coronavirus has managed to paralyze the global economy, with sharp falls in export power-houses Japan and South Korea overshadowing a modest improvement in China.
Manufacturing gauges have also seen a downward trend in countries such as Vietnam, Indonesia, and the Philippines, according to the Purchasing Managers’ Index (PMI) surveys. This drop underscores the increasing damage that is being brought on by the COVID-19 pandemic that has infected thousands, derailed supply chains, and led to city lockdowns worldwide.
China, which was the epicentre of the outbreak, has seen a slight recovery from the economic disruption caused by the outbreak in Wuhan. While growth rate is still marginal, highlighting the intense pressure facing businesses as domestic and export demand slumps; the fact remains that the manufacturing industry there is on the road to recovery, albeit slowly.
While factories in China gradually restarted operations after lengthy shutdowns and a fall in virus cases allowed the country to start relaxing travel restrictions, activity in South Korea shrank at its fastest pace in 11 years as many of its trading partners imposed dramatic measures to curb the virus’ spread.
“If you look at the Korean numbers, they’re fairly bad … They’re likely to get worse still because Korea will be dependent on parts from Europe and the United States,” said Rob Carnell, Asia-Pacific chief economist at ING in Singapore.
“Policymakers have to accept the inevitable that there is a massive global pandemic here, there is an outbreak in almost every country globally and certainly in our region, which is getting to levels that if they don’t take very dramatic action, it’s going to get much worse,” he said.
Japan’s factory activity has also been hit particularly hard with business sentiments souring to a seven-year low in the three months to March 2020.
“The tankan survey by the Bank of Japan clearly shows a sharp deterioration in business sentiment and confirms the economy is already in recession,” said Yasunari Ueno, chief market economist at Mizuho Securities.
In the meantime, policymakers across the globe have announced huge monetary and fiscal policies and stimulus packages to try and mitigate the effects of the pandemic, keep struggling businesses standing, and to ensure job security for the people.
But many measures have been short-gap steps to deal with the immediate damage to corporate funding and shore up banking systems amid worries of a credit crisis. The International Monetary Fund has said the pandemic was already driving the global economy into recession, calling on countries to respond with “very massive” spending to avoid bankruptcies and emerging market debt defaults.