Covid seems to be the “Achilles heel” for economies of Southeast Asia, says Jefferies

SINGAPORE – The failure containing the infections from Covid is hindering the recovery of many economies of Southeast Asia, says Sean Darby of Jefferies.

“Indonesia, like lot of of the economies of ASEAN, has yet to really reckon with the Covid-19 virus “, Darby, global head of equity strategy to US investment bank, he told CNBC’s “Squawk Box Asia” on Tuesday.

“It seems to be the Achilles heel for the economies of ASEAN in this moment “, he said referring to the Association of Regional grouping of Southeast Asian nations.

Goldman Sachs recently cut its 2021 growth forecasts for major economies in Southeast Asia like a wave in the more delta infectious variant triggered daily record tall in infections in Indonesia, Malaysia and Thailand these past weeks.

Indonesia’s credit rating under pressure

the wave in regional infections has also put in discussion of credit ratings of The economies of Southeast Asia.

Moody’s Investor Service warned Monday that Covid infections are reborn in Indonesia could undermine the country’s credit rating.

“A rebirth in more infectious mutations of the virus poses significant risks to Indonesia’s economy recovery, “Moody said in the report. He will do it also “challenge government plans for reduce the fiscal deficit at pre-pandemic levels, a negative credit “.

Days earlier, S&P Global Ratings released similar comments, warning in a July 15 report that Indonesia’s “existing credit reserves” on ratings will be affected if blocks in course are extended “.

On Tuesday, Indonesian President Joko Widodo announced an extension of restrictions related to the pandemic that are set until 25 July, Reported by Reuters.

Unfortunately, the potential for Indonesia to reach its pre-pandemic levels is likely to be quite low at the moment given the low prevalence of the vaccine.

Darby said Indonesia’s situation needs to be contextualized: the country’s balance of the payment position is “in reality a lot good”he said, adding that its foreign exchange reserves are close record tall. On the top of that, Indonesian economy is also experiencing “a decent enough manufacturing revival”.

However, he admitted that keeping Covid in check is likely to hold up in the way of Indonesia joins his full economic potential. The country is in global delay in his vaccination efforts – only 5.95% of Indonesian population was fully vaccinated like of July 18, according to Our World in Data.

“The reality is that … chances are you won’t reach full economic potential down to some form of herd immunity, “said Darby.” Unfortunately, the potential for Indonesia to reach its pre-pandemic levels is likely to be quite low at the moment given the low prevalence of the vaccine “.

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