New economic data from across the APEC region shows a softer economic contraction of 1.9 percent in 2020, with continued fiscal measures leading to a rise in government consumption and improved investment and household consumption.
According to the latest APEC Regional Trends Analysis, household consumption, APEC’s main driver of growth, improved to -3.9 percent in the second half of 2020 on a year-on-year basis, as compared to -7.0 percent in the first half of last year. Investment followed the same trend, recording a smaller decline of -6.1 percent in the second half of 2020 compared to -10.5 percent in the first half.
The report notes that governments across the region have learned effective ways to manage the pandemic and people have learned to adapt to new ways of earning a living. This has resulted in a gradual reopening and resumption of economic activities, which boosted consumption.
The region’s economy is estimated to grow by 6.3 percent in 2021, with an expected strong increase in domestic and global activity, as pent-up demand is unleashed. The development and production of multiple vaccines also boost optimism for a more durable economic recovery.
“The worst fears from last year did not come to pass as we saw stronger economic rebound in the second half of last year, and this will likely continue throughout 2021,” said Dr Denis Hew, Director of the APEC Policy Support Unit. “However, the region continues to face significant uncertainties, largely linked to how the pandemic is evolving, while job losses due to the pandemic and expectations of higher inflation this year could suppress consumer spending.”
The weakness in investments, which is projected to extend to 2021, could also affect growth, according to the report. “The start-stop economic reopening scenario as economies navigate through a resurgence of infections could hold back investment activity,” Dr Hew added.