Time for Asia to ditch temporary Covid-19 measures and learn to live with the virus

More than a year since the World Health Organization designated the Covid-19 outbreak a pandemic, the global economy is still working through the consequences. While the US and Europe are reopening and their consumers are rightfully happy to gather and enjoy themselves again, the story is very different in Asia. In the past two months, Hong Kong has done well keeping local infections at bay. However, India has experienced devastating infection numbers and deaths, with its health care system stretched to breaking point. Thailand saw its most severe wave of the outbreak, and Malaysia has imposed another national movement control order until at least early June. In Japan, high infection numbers are driving strong public opposition to hosting the Olympic Games in late July. Singapore and Taiwan, which have decent track records of containing the infection, have also seen local cases rise. Both have imposed varying degrees of social distancing measures to curb the spread. What does all this tell us about the likely economic fallout? First, the battle against Covid-19 requires governments to be agile and flexible in their lockdown policies. The past months have provided valuable experience, but a successful track record does not guarantee the same going forward. One cliché in the dealing room is that a trader is only as good as their last trade, and this is the same for dealing with the pandemic. Taiwan had a very successful 15 months in keeping the virus at bay, yet loopholes in its quarantine process might have led to the current outbreak. Second, governments are likely to remain on high alert until a larger share of their population is immunised either via infection or vaccination. Asia’s progress on vaccination is worryingly slow. Singapore leads the region with about one-third of its population having received at least one dose. Our estimates put mainland China at 20 to 25 per cent with 500 million vaccinations recorded so far. Hong Kong is at 16 per cent, while most of Asia, including Japan, South Korea and Indonesia, remains in single digits. This is because of a combination of vaccine hesitancy among the public and a lack of availability in some countries. Many countries will not reach herd immunity until 2022, or even later, at the current pace. Singapore is a noteworthy example. Its recent outbreak saw new infections reach 20 to 40 cases a day, which is modest in absolute numbers and relative to the size of its population. While leading Asia in vaccinations, the number is not yet high enough to establish herd immunity. Given the government’s concerns over the more infectious B.1.617 variant, it opted to reintroduce a lighter version of its “circuit breaker”, or lockdown measures. This shows even a relatively modest outbreak can have a significant impact on the economy. Third, international or regional travel cannot resume until the region has a higher level of protection. Travel bubbles are constantly at risk of being popped if one of the destinations suffers an outbreak. Just look at the multiple failures of the Hong Kong-Singapore travel corridor. This brings us to the final lesson. Asian authorities will need to learn to live with Covid-19 in the long run. Widespread vaccination, ample testing capability and track and trace programmes are the only way to bring us to the next stage of sustained economic stability. In the US, more than 20,000 people are still being infected by the virus every day, but hospitalisations and deaths have declined dramatically. Vaccination is playing a key role here. This gives authorities and businesses more confidence to reopen. Sports arenas are welcoming fans again, including sections for vaccinated spectators, and restaurants are reopening. It is probably a bit too early for everyone to unmask, but this experiment in taking some calculated risk is working. Asian governments need to accept the fact that infections will occur even after their populations have reached herd immunity. Lockdowns, closing borders and social distancing restrictions are only temporary measures that carry high economic costs. Vaccinations, ample and accurate tests, and track and trace programmes are essential in managing the pandemic while mitigating the economic burden. It is time to move away from temporary measures and adopt solutions that enable Asia to coexist with the coronavirus. Tai Hui is chief market strategist for the Asia-Pacific at JP Morgan Asset Management