Asia-Pacific has been one of the first regions to emerge from the Covid-19 pandemic, but the IMF fears the damage will leave deep scars on some economies that will take several years to heal.
National lockdowns and the stalling of business activity have amplified existing problems in certain countries: worsening inequality, adding to unemployment and exposing gaps in social welfare. For the region’s companies, however, a higher debt burden and a reduction in the earnings to service it, pose a more immediate threat.
Earlier this month, the IMF said: “Government support is helping them to keep afloat, but a large wave of corporate bankruptcies could follow when that support is withdrawn . . . This vulnerability can be especially acute in Asia, if global financial market conditions tighten in the process of recovery, leading to capital outflows and additional pressure on the corporate sector.”