As the COVID-19 pandemic derails economies worldwide, many of the newly poor are coming from Southeast Asia, dealing a huge setback to a region that had been prospering from a surging middle class.
Job losses have paused an outsized boom that Southeast Asia was experiencing over the past few years, with economies possibly taking years to recover.
In the Philippines, which has the most virus cases in Southeast Asia, a survey released on Oct. 6 by the World Bank and local agencies showed that almost half of shuttered businesses were unsure when they could reopen.
Illustration: Louise Ting
The extended effects of the nation’s lockdown have been devastating to people such as Manila resident Jenn Pinon, 35, who spent years working on a fine arts degree that she hoped would make her financially secure.
Instead, she has lost contracts she had won as a graphics designer, leading her to turn to selling eggs and hummus online. She has been living in her churchmate’s unused condominium unit to keep living expenses low.
“I didn’t expect it at all,” Pinon said of the work that she has lost. “I have to thank God that he gave me enough savings for now. Let’s just hope it lasts.”
While incomes have plunged worldwide, the pandemic’s effects are especially severe in emerging parts of Southeast Asia, where a wave of job losses and weak social safety nets mean that millions are at risk of losing their rung on the social mobility ladder.
However, the region is likely to come in second behind India in charting the number of new poor in Asia this year, said Ramesh Subramaniam, director general of the Asian Development Bank’s Southeast Asia regional department in Manila.
A lack of consumer demand, impending bankruptcies and social-distancing measures continue to impinge on the job market, Oxford Economics economist Priyanka Kishore said.
“This points to a long, drawn-out recovery,” she said. “We estimate Southeast Asia’s GDP to be 2 percent below the pre-COVID baseline, even in 2022.”
Bain & Co last year forecast that Southeast Asia would add at least 50 million consumers to the ranks of its middle class by 2022. The prospect of US$300 billion in disposable income attracted the likes of Toyota Motors and Ikea to expand in the region.
However, disappearing incomes are stalling growth, as consumption represents about 60 percent of the GDP of the region’s major economies, except for Singapore, the Washington-based Center for Strategic and International Studies said.
As many as 347.4 million people in the Asia-Pacific region could fall below the US$5.5 per day poverty line because of the pandemic, the UN University World Institute for Development Economics Research said.
That is about two-thirds of its worst-case global estimate and underscores the World Bank’s forecast of the first net increase in worldwide poverty in more than two decades.
The toll has been tough on people such as Adi Muhammad Fachrezi in Indonesia, who became the first in his family to go to college in 2014. Showing tourists around Java’s towering volcanoes and white sand beaches earned him about 20 million rupiah (US$1,355) per month, covering his tuition and board.
However, that income has dried up as the virus has kept tourists away and he has had to put his studies on hold.
“I’m kind of ruined financially now,” Fachrezi, 24, said.
The magnitude of the economic free fall in Southeast Asia’s five biggest economies was severe in the second quarter. Indonesia shrank 5.3 percent annually, Malaysia 17.1 percent, Philippines 16.5 percent, Singapore 13.3 percent and Thailand 12.2 percent, data compiled by Bloomberg showed.
Vietnam, which was among the few winners in the US-China trade dispute, sees its three-decade economic ascent grinding to a near halt this year, with contractions possibly persisting through early next year, amid withering manufacturing and a tourism drought, HSBC Holdings said.
Having weathered political upheavals, financial crises and natural disasters, Southeast Asia is no stranger to setbacks. Yet, unlike previous events that pushed millions in the region into joblessness and poverty — such as the Asian financial crisis and the 2004 Indian Ocean tsunami — there are no other labor or export markets to run to this time.
That is signaling a prolonged financial squeeze for Southeast Asians.
Improvements in income and poverty numbers are likely to lag an economic rebound by two to three years, Subramaniam said.
The International Labour Organization estimates that time at work equal to at least 48 million full-time jobs disappeared in the region in the second quarter.
For months, Farah, 28, who asked to be identified only by her first name, has been futilely looking for a job in the Malaysian capital, Kuala Lumpur. Furloughed from a teaching post at a tutorial center in March, she has been relying on her husband’s modest pay from his job at a retirement home and a little government aid.
“We only eat what is necessary to keep us full,” she said.
Her situation lies in stark contrast with a middle-class upbringing. Farah’s life resembles that of her father’s tough childhood, which the patriarch overcame by landing a cushy government post that afforded her a private college education.
Farah and her husband almost became homeless after their lease expired during lockdown. They had to borrow money from relatives to afford the deposit on their apartment.
Southeast Asia’s top five economies have each spent billions of dollars in income support to cushion the pandemic’s blow.
Despite the efforts, social protections such as unemployment benefits across the region, except for in Singapore, remain “often not as good as they should be,” International Labour Organization economist Christian Viegelahn said.
The region’s governments on average spend only 2.7 percent of GDP for such programs, far below the 10.8 percent global ratio, he said.
Informal workers, which represent 76 percent of Southeast Asia’s total employment, often fall through the cracks, he added.
In Java, Fachrezi is trying to look forward. He wants to rebuild his tour guide business, finish his communications course and still be the first in his family to earn a college degree.
“My best hope is that my business can operate again at the end of the year to coincide with the holiday season,” Fachrezi said.
That hope is a tenuous one — virus cases in Indonesia have continued to climb in one of the region’s biggest outbreaks.
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