What is the situation in Asia?
When it comes to containing the spread of Covid-19, economic growth, and consumer spending, countries in Asia fall into one of three categories: 1) good public health situation, strong economic growth, and buoyant consumer spending; 2) stable public health situation, moderate economic growth, and consumer spending, or 3) poor public health situation, slow economic growth or contraction, and stagnant/contracting consumer spending.
Taiwan, Singapore, Hong Kong, and China all fall firmly into the first category. Take Taiwan first. Infections peaked at around 700 new cases daily in May and have since returned to their pre-spike numbers in the low double or single digits. Single-dose vaccinations rose from 1% to nearly 40% by mid-August; herd immunity should be achieved by the end of the year—early 2022 at the latest. GDP growth is still expected to reach 5-6% this year and businesses adapted well to temporary government health-related restrictions, minimizing the impact on business activity and consumer spending.
Infection rates in Singapore and Hong Kong are similarly low, local governments continue to push for mass vaccination, and GDP growth projects have been revised upwards to 6-7% and 5.5-6.5%, respectively. Despite concerns over the spread of the Delta variant in China, the official number of infections is low and the economy is forecast to grow by over 7% this year. The major exception in the case of China is new and ongoing government rules regarding cold chain foods and beverages which has slowed their import, approval, and sale. When these restrictions might be lifted is unclear.
Overall, the public health situation in these countries is good or stable allowing for a strong return to growth and increasingly buoyant consumer demand.
Countries falling into the second category include a modest number of mostly wealthy markets, such as Japan and South Korea. Both are struggling to contain a recent wave of infections and achieve nation-wide ‘herd immunity’ through mass vaccination programs, currently at around 40% and 25%, respectively. Despite these challenges, Japan’s economy is expected to grow by 3.7% in 2021 and South Korea’s by 5.9%. This growth is boosting consumer demand and a return to healthy levels of spending.
A smaller number of emerging markets, such as Vietnam, also fall into this category. Until a recent wave of cases beginning in June 2021, Vietnam was faring well through the pandemic. Despite this, the government has rolled out a mass vaccination program with the goal of achieving 80% immunity by June 2022. Similarly, the economy is expected to grow by nearly 7% this year and consumer demand remains strong as local incomes continue to rise.
The third category is populated almost entirely of low-income emerging markets—such as Indonesia, Malaysia, and India—struggling to managing ongoing waves of infection and mass vaccination programs due to insufficient healthcare infrastructure and administrative nous. Indonesia is slowly coming down from a recent wave of infections though official numbers are likely a significant undercount. The economy is expected to expand by 3.5-4.3% in 2021; however, this is far lower than the 5-8% of recent years. High baseline infection rates, slowly increasing vaccination rates, and slow growth (when compared to increases in population and inflation) will dampen local income growth and consumption.
What does this mean for businesses?
Countries falling into Categories 1 and 2 remain good targets for expansion for 2 main reasons. The first is their sound fundamentals: returns to strong or stable economic growth. The second is effective mass vaccination programs paired with healthcare infrastructure capable of managing infections or potential future waves. These factors will support growing incomes and sustained consumer spending. Those in Category 3 will struggle well into 2022 and may not truly stabilize until 2023 or later, depending on when mass vaccination and/or herd immunity is achieved.
Asia as a whole remains an excellent opportunity for consumer brands to expand though the pandemic’s current and long-term effects have changed what strategies will work and what needs to be done to ensure the long-term success of a brand in any given market in the region.