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Economic impact of 

COVID-19 on ASEAN growth markets

June 2020


Since 2015, many Growth Economies such as Vietnam, the Philippines and Indonesia have taken advantage of China’s economic ambitions outside its own borders. By the end of 2019, global economic growth was resurgent, galvanised by hopes of an easing of the trade war between President Trump and Chairman Xi. This optimism prompted an expansion by Southeast Asian Growth Economies of their exports into the global supply chain.


Vietnam’s GDP, for example, grew from 4% in 2015 to 7% in 2019 with increasing demands on exports of electronics, clothing and industrial components. This economic growth prompted the emergence of high-rise buildings, expensive resorts and the minting of many new billionaires. By comparison, Indonesia and the Philippines enjoyed an expansion in their commodities exports and a growth in international demand for their staple consumer brands such as Indomee and Jolibee. Economic growth saw higher income, improved infrastructure, expanded healthcare systems and a better standard of living through the period in these countries.


However, as is so often the case, there are hidden dangers for countries peaking at the wrong time. A prime example is Malaysia, a Tiger economy, which peaked and fell during the 1997 Asian economic crash. Malaysia was expected to surpass its neighbour Singapore by 2020 from foreign investments by becoming the technological hub of Asia in the late 1990s.


However, the Asian growth slow down, which triggered a large flight of foreign investment, crashed the economy overnight. The Malaysian Ringgit devalued by 50%, doubling its debt and interest payments and plunging the economy into a decline from which it has never fully recovered. 

Unlike the 1997 crash, COVID-19 is an invisible enemy which has caused the global workforce to stay at home to stay alive. Death rates recently surpassed the 100,000 mark but these numbers are only an accurate tally of deaths in developed countries with WHO-approved test kits. Underdeveloped countries have not reported accurate data. Notwithstanding, COVID-19 may hamper or halt the growth these new Tiger economies.


The Philippines, under the leadership of President Duterte, may seem to be utilizing disproportionate measures in enforcing the lockdown. However, a “shoot them dead” enforcement policy has been regarded as simply what it takes to keep many of the country’s hand-to-mouth working-class citizens from trying to make a living outside their homesto resist the inevitable slide back into poverty. Vietnam, on the other hand, has not reported their COVID-19 numbers transparently and home deaths are on the rise. 

For its part, Indonesia was still allowing religious mass gathering at the peak of Wuhan’s pandemic event. All three countries simply can afford neither a lockdown for too long nor the massive economic stimulus packages which would be required to keep the economic wheels turning. Additionally all three countries have insufficient food reserves to keep their populations fed for any protracted period.

COVID-19 has demonstrated in stark relief how the world has relied on China’s demand for raw materials and the seemingly inexorable supply of products and specialised components from their factories. In this wake of this crisis, the world may have to review its dependence on China; the Wuhan outbreak does not help their damaged reputation either.


However, Vietnam, Indonesia and the Philippines may have hidden a trump card up their sleeve by providing an extremely viable alternative to Chinese factories and manpower: with their expanded economic footprint and experience, it is likely that these countries could evolve their business models to adapt quickly to global logistics demands. With their neighbour Singapore as the Asian financial hub, it is possible that with the right impetus, they would be well-placed to press this advantage.


In the final analysis, the success of these countries will be determined by where they choose to build their allegiances. The choice between China and the United States of America is not an easy task: it is essentially the choice between a cash-rich, but proscriptive Chinese neighbour, which would require less of a logistical overhaul, or the largest economy in the world, but with a President who seeks to extract a trade deal which might be costly to growth. 


COVID-19 will undoubtedly be the spark to ignite the next steps of growth for these new Tiger economies and which will determine whether they can successfully sustain anything approaching a 7% GDP growth over the next decade.

About the author(s)

Alex Koh is an independent analyst, writer, and economist. Harold Alby is a managing director and chief operating officer at Inova Capital. Justin Inniss is a managing director at Inova Capital.For more details on our insights please get in touch with us at Inova Capital AG on +41 415616905. Inquire about our ideas and nowcasting capabilities.

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