The Banking Executive Magazine - August 2021

Emerging Economies it comes sugarcoated. That is the re- sponsible thing for the World Bank to do: "avoid causing alarm". But poli- cymakers should heed the important cautionary messages buried in the text. This GEP makes three key points. First, the world economy is recover- ing from the pandemic, but while ad- vanced economies, with already successful or rapidly progressing COVID-19 vaccination programs, appear set to return to or even ex- ceed their earlier growth rates, EMDEs’ prospects are more mixed. The strongest-looking emerging-mar- ket region is East Asia and the Pa- cific, where the World Bank forecasts 7.7% GDP growth in 2021, ahead of South Asia’s 6.8% expansion. Within this broad region, output in China, Vietnam, and Bangladesh has now surpassed pre-pandemic levels, and the latter two countries, starting from a lower base, are well positioned for sustained high growth. In terms of potential, Indonesia is the other economy to watch. But its ex- perience with the pandemic thus far has been mixed. Indonesia began with an aggressive vaccination plan. Though there have been ups and downs, with 4.6% of its population now fully vaccinated, it is currently ahead of many other Asian countries, such as Sri Lanka (3.9%), India (3.8%), Thailand (3%), and Vietnam (0.1%). Moreover, the Indonesian govern- ment has in recent years attempted some structural reforms, such as labor-market liberalization, by enact- ing a so-called omnibus law on job creation. Although this has been po- litically argumentative, other reforms appear to be yielding dividends. President Joko Widodo’s government took early steps to bring policy man- agement for the pandemic and the economy under a common expert group, the COVID-19 Handling and National Economic Recovery Com- mittee. This helped the government to avoid the mistake of paralyzing the economy in the name of control- ling the pandemic, and ultimately faltering on both fronts, as happened in some emerging markets. But for much of the developing world, the medium term looks bleak. The huge global disparity in vaccine access means that poorer countries are likely to face more waves of the coronavirus and its variants in the coming months and years. And they will probably have to deal with these outbreaks by locking down parts of their economies. ISSUE 152 AUGUST 2021 the BANKING EXECUTIVE 29