A mixed second quarter

The second quarter GDP figures for the region that have already been published make for grim reading, but there is a big divergence between countries. In aggregate terms we estimate that Emerging Asia (excluding China) contracted by around 10% y/y last quarter, which would be the biggest drop in output since records began. The worst-performing economies are likely to be places such as Thailand, which have a large tourism sector, or the Philippines and India, which have suffered long, damaging lockdowns. We think GDP will have contracted by around 15-20% y/y last quarter in these three places. However, it is not all doom and gloom. Preliminary GDP figures for Korea, where the virus is now under control, show the economy contracted by “only” 2.9% y/y last quarter. Taiwan, where the virus looks to have been eliminated and which avoided the need for a lockdown, is likely to have avoided recession altogether. Strong demand for the island’s electronics products is providing an important boost to demand there. The region’s best performing economy, however, is likely to be Vietnam. Although GDP growth slowed to a 30-year low of just 1.8% in the first half of the year, the economy is now rebounding strongly. Provided the recent uptick in cases does not develop into something more serious, we think GDP will grow by 4.0% this year.