Rising virus numbers unlikely to derail recovery

The Omicron variant is spreading quickly across Asia. Daily virus numbers are now at record levels in Korea, Singapore and the Philippines. However, the economic impact of Omicron is shaping up to be much smaller than previous virus waves. Restrictions, where they have been imposed, have been light touch. Governments are relying on successful vaccine rollouts, rather than lockdowns, to protect public health. Our Mobility Trackers suggest that activity is holding up well. All this supports our view that Omicron does not pose a major threat to the region’s recovery this year, and that GDP growth in most countries will be above-trend and above-consensus in 2022. The key exception to this is Taiwan, which is still pursuing a zero-COVID strategy. The latest outbreak there presents a considerable downside risk to Taiwan’s consumer-facing sectors and could lead to the introduction of strict containment measures if cases take off again.