Financial chiefs from the Association of Southeast Asian Nations, China, Japan, and South Korea (A.S.E.A.N.+3) vowed to strengthen financial cooperation amid the COVID-19 pandemic. On May 3rd, the region’s finance ministers and central bank governors convened to pledge continued support for the countries most severely impacted by the pandemic. The ministers agreed to cooperate in effecting long-term and comprehensive solutions towards recovery after the pandemic recession.
The virtual meeting was held on the sidelines of the Asian Development Bank’s annual meetings. In a joint statement, the group reinforced regional financial cooperation to overcome pandemic-induced economic upheaval. “We expect a rebound in 2021 as the recovery gathers momentum and vaccine rollouts allow a gradual opening up of our economies,” the statement read.
Despite the uneven recovery across and within nations, the ministers pledged to achieve an “inclusive” rebuilding. The ministers discussed the range of viable and available policy tools to ensure fiscal sustainability and maintain financial stability across the region. They also highlighted the need to “gradually and carefully normalize expansionary policy measures” to mitigate the risk of a fiscal cliff.
The statement reiterated the importance of the Chiang Mai Initiative Multilateralisation (C.M.I.M.) as an essential regional financial safety net. Established in the aftermath of the 1997 Asian Financial Crisis, C.M.I.M. is a multilateral currency swap arrangement for liquidity support among A.S.E.A.N.+3 members. According to Reuters, the initiative plays a crucial role in supporting regional financial stability by allowing the member economies, which include the A.S.E.A.N.+3 and Hong Kong, to tap currency swap lines to secure currencies in need.
The A.S.E.A.N.+3 ministers vowed to boost the C.M.I.M. during their last virtual meeting in September 2020. Delivering on their promise, the ministers welcomed new amendments to the agreement in March which bolster financial assistance in the region. The financial chiefs also emphasized A.S.E.A.N.+3’s economic resilience after a tough year, boasting that the region’s economic contraction of 0.2 percent was “moderate” compared to the global downturn. The ministers further highlighted five A.S.E.A.N.+3 economies’ “post[ed] positive growth” in 2020.
The financial chiefs did recognize the heterogenous recovery process within the region, but failed to acknowledge the divergent experiences each country is having with vaccinations. Though the chiefs stressed that the vaccine rollout is a crucial factor in determining a country’s recovery trajectory, there was only brief mention of the “different pace of vaccinations” in individual nations. Controlling the domestic spread of the virus is paramount if individual countries hope to get their economies back on track. However, recent surges in case numbers and slow vaccination rates in the region threaten a robust recovery.
“In this respect, the regional outlook [of economic recovery] is mostly not promising,” Roland Rajah writes for the Brookings Institute. “The spread of the virus continues in Indonesia, Philippines, and Malaysia, with sporadic outbreaks in other countries. Meanwhile, new and more dangerous COVID-19 variants are a threat, and vaccine rollout is likely to be slow.”
As COVID-19 restrictions linger in many countries, the International Monetary Fund has downgraded its collective forecast for A.S.E.A.N. economies, according to C.N.B.C. Vaccination is also progressing at a slower pace in those countries. Statistics from Our World in Data show that while 8% of world’s population has received at least one dose of a vaccine, only two A.S.E.A.N.+3 countries (excluding China) have a higher rate than that global level.
Rajah predicts that on the international trade front, A.S.E.A.N.’s growth outlook seems more promising. As global trade continues to play a key economic support role through 2021, A.S.E.A.N.+3 financial leaders committed to fostering more diversified and resilient economies through regional trade networks. The ministers reaffirmed their commitment to an “open and rules-based multilateral trade and investment in the region.”
However, according to Rajah, the “relatively small fiscal response … already does not bode well for a strong recovery” in the overall region. With the exception of Singapore and Thailand, the average COVID-19 fiscal response in A.S.E.A.N. was a fifth of the global level, and even lower than that of major Western economies. To lead a steady recovery, financial leaders must follow through with their promise to maintain expansionary macroeconomic policies within their countries.
Strengthening regional financial ties amid the pandemic is undoubtedly a positive step to economic revitalization. China, Japan, and South Korea’s commitment to exploring new initiatives in support of their ASEAN neighbours particularly enhances the region’s post-pandemic recovery outlook.
While the meeting addressed fortified trade agreements and sustainable expansionary policies, the unique challenges each country’s vaccine rollout faces were only briefly acknowledged. Vaccination programs fall under the purview of public health officials, but A.S.E.A.N.+3 financial leaders seemed to neglect their significance in shaping a country’s recovery. If the ministers expect a rebound in 2021, individual countries’ disparate needs must be considered, including access to and delivery of vaccines.