Recent vaccination rise may ease pandemic risks in Asia: Fitch
Hong Kong: The recent acceleration of vaccinations in parts of Asia can reduce risk of setbacks to economic recoveries and public finances associated with further waves of Covid-19 pandemic provided that it is sustained, Fitch Ratings said on Wednesday. The Asia Pacific region's Covid-19-containment response was a relative global outperformer in 2020. But in 2021 its vaccine rollout has in aggregate lagged that of other regions, apart from Africa. The number of doses delivered relative to total populations remains low compared with both the United States and with that necessary to achieve herd immunity. Reasons for this vary. Some countries that had done well in containing the virus were slow to move on vaccine approvals and rollouts. Others have had difficulty procuring vaccine supplies, particularly where authorities did not prioritise this at an early stage. Nevertheless, the pace of vaccination has begun to accelerate in recent weeks in several Fitch-rated sovereigns in Asia, including China, South Korea, Japan and Australia. Vaccination rates remain very low in many other Fitch-rated Asian sovereigns which can leave them exposed to pandemic setback risks, said Fitch. These were highlighted by escalation of Covid-19 infections in a number of countries in April and May. Governments in India, Japan, Malaysia, Thailand, Taiwan and Vietnam all tightened restrictions on activity in response to new infections. There have also been recent outbreaks, albeit relatively small in terms of case numbers, in China's Guangdong province and the Australian state of Victoria.
Fitch said the low rates of vaccination and outbreaks of new infections pose near-term downside risks to economic growth forecasts, and can delay recoveries from the pandemic shock of 2020. However, relatively narrow applications of lockdowns coupled with adjustments in societal and business behaviour should help to cushion the economic impact. Weaker economic outlooks may add to pressures on public finances, particularly where governments seek to offset the adverse effects of restrictions on the economy and households through fiscal stimulus packages. Thailand, Malaysia and Taiwan have all announced additional spending plans in the wake of their latest infection waves. Medium-term public debt dynamics are a key consideration in our ratings assessments, particularly in sovereigns such as Malaysia and India where government debt/GDP levels are significantly higher than the BBB peer medians. There is a high degree of uncertainty over how fast governments and societies will revert towards pre-pandemic policies and behaviour as vaccination levels rise, said Fitch.
The pace of recovery in travel will be particularly important where tourism was an important component of GDP prior to 2020, such as in Thailand and Sri Lanka or the Maldives where tourist inflows have recently picked up. Pandemic setback risks may also linger even with relatively high rates of vaccination, given uncertainties about the efficacy against future new strains of Covid-19. Nonetheless, Fitch anticipates countries with higher levels of vaccination will be better positioned for near-term recoveries than those where vaccination rates remain low.
