In an inaugural issue of the CAREC Institute Quarterly Economic Monitor (QEM), our Chief Economist team has compiled available data and worked out quarterly trends to gather a first glimpse of the emerging outlook as the world and the CAREC region learn to live with the pandemic while reliable vaccination options offer hope and confidence despite the overhang of the second wave and emergence of a more virulent new strain.
Our datasets present a case for cautious optimism. Seasonally adjusted figures indicate GDP growth of 4.5 % in Q3 from -2.4 %, a robust gain of almost 7 percentage points. Similarly, YoY growth for Q3 has improved to minus 2.2 %, from the floor of minus 6.3 % in Q2 2020. Manufacturing and retail sales have been first to recover, while mining and service sectors remain subdued. The PRC leads this recovery, while other countries have also shown signs of recovery.
Another good news is a largely intact macro-economic framework in most of CAREC. Monetary expansion remains moderate, currencies have remained largely stable and weaker demand has created more favorable balances of external trade due to larger import contraction. Inflationary trends generally remain within acceptable limits. Downside risks include FDI dry down, larger fiscal deficits due to the decrease in revenues and higher government expenditures, and resultant higher public debt. Pace and extent of recovery will depend, in large part, on CAREC governments’ ability to prepare and implement large scale vaccination programs. This is an emerging challenge as there are apprehensions that some developing countries might find themselves at the far end of the global queue for the vaccine and wait till 2024 to get their requirements.