The global economic recovery has suffered a glancing blow. The recent performances of big commercial powers and small-but-indicative nations point to a far-from-perfect rebound. A trio of Asian countries reporting growth this week show why the bullish scenarios tossed around at the end of 2020 resonate, but what some of the cheery sentiment is skipping over. Too much focus on the broad-brush global picture glosses over telling nuances at the regional level; without that insight, projections can go awry.
Japan, Singapore and Thailand recorded a promising end to a terrible year. Critically, the forces that drove the world into a massive recession — Covid-19 and the efforts to contain it — still haunt Asia. That matters because the region is perceived to have tackled the pandemic relatively well, and because of Asia's strength in exports and dependence on travel. The next couple of months are going to be tough. The rosy prognosis for things to really get better has been shunted to the middle of the year.
Japan rounded out 2020 with a 12.7% surge in gross domestic product in the fourth quarter. While that was better than forecast, the world's third-largest economy still shrank a hefty 4.8% for the year and growth is likely to disappear between January and March. The depth of that fresh hole depends on the duration of the state of emergency, which has kept people out of offices and curbed consumer spending. With a spike in infections starting to abate, belief remains in Japan's recovery. It will just be later, that's all. Strong Japanese exports and hale capital spending plans from companies, buoyed by a solid recovery in China, will prevent the bottom from falling out. Economists say Japan demonstrated resilience. It will be needed.
Singapore hasn't had a lockdown since June. Community cases of coronavirus have been scant lately. That helped the city-state plow ahead at year-end; GDP grew a seasonally adjusted 3.8% in the fourth quarter from the prior three months, surpassing the 2.4% estimated. That didn't prevent Singapore from clocking its worst economic year since it became a republic in 1965, suffering a 5.4% slide.
Better times are projected for Singapore, long a hub for trade, finance and labor. However, the brighter picture depends heavily on the rest of the world. While taxi drivers are doing brisker business and downtown has a little more bustle at lunchtime than several months ago, important parts of the economy are still finding it tough. Aviation, a systemic industry for Singapore, remains mothballed. Big hotels now cater to locals enjoying staycations and those few lucky essential travelers serving their compulsory quarantine, often two weeks in duration.
Thailand, which also reported GDP this week, is an avatar of a different kind. The kingdom is one of the most tourism-dependent places in the world. Here again, data showed a glass half-full recovery: The economy contracted 6.1% for all of 2020, a touch superior to the 6.4% decline expected. Yet the performance was the worst since 1998. Modest fourth-quarter growth was the product of domestic stimulus and local demand. That's great, but without the world opening up some more, it's hard to see how it gets much better.
The textured outcome for each of these Asian icons tells part of the global story in its own way. Policy activism, driven by record amounts of fiscal stimulus and monetary rollouts, prevented an absolute worse-case scenario. But their year also speaks to reliance on the rest of the world. That basically means China and the U.S. Beijing did well in 2020, defying naysayers who thought the communist state had met its match early last year. Washington made lots of mistakes, but the power of the dollar meant spigots opened by the Federal Reserve and Congress undergirded the global response to Covid. Morgan Stanley economists, among the most optimistic, see growth in the U.S. accelerating to more than 7% by year-end.
I wrote in July about the risk of economies getting stuck in a netherworld of being half open, half closed. The danger still holds. In the string of less-dire recent data, do we focus on the "less" or the "dire?" We've come a long way in our fight against Covid and the economic depredations visited upon society. Vaccines are rolling out, offices are being refitted and malls see more foot traffic.
Just don't look for instant change. Progress will lie in the shadings. That's what this week in Asia tells us.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.
Disclaimer: This opinion first appeared on Bloomberg, and is published by special syndication arrangement.