SOUTH-EAST Asian markets look set to be rocked by sharp spikes in joblessness, as the deadly Covid-19 pandemic smashes economies.
About 7 per cent of Asean-6 employees, or millions of workers ,could be laid off in the looming recession, BofA Global Research analysts estimated, warning that a crash in the labour market “will also threaten the economic recovery expected once the pandemic fades”.
Retrenchments could number in the millions in Indonesia, Vietnam, the Philippines and Thailand, based on the share of workers in small businesses and informal employment.
“Indonesia and Thailand are at risk of a historically large downturn, while significant labour pain is expected for the rest,” wrote the analysts, citing factors such as the expected recession size, employment profile, and fiscal policy response of each country.
The Asean-6 region - Indonesia, Vietnam, the Philippines, Thailand, Malaysia and Singapore - could see as many as 20.7 million jobs axed, led by Indonesia at 9.4 million.
“Given the nature of the shock, workers in particular sectors are more at risk of losing their jobs than others. Services activities such as accommodation and food, wholesale and retail trade, and real estate and business services are likely to be particularly hard hit,” the report noted.
“While some countries have allowed manufacturing activities to continue, the sector will feel the brunt of the drop in global demand.”
To be sure, the Asean-6’s governments are all rolling out fiscal support packages to the tune of as much as 8 per cent of gross domestic product.
But only Singapore and Malaysia offer direct relief for labour costs through wage subsidies, while other countries lean on cash transfers and tax incentives, the analysts remarked.
“Given that risks are still skewed to the downside, we continue to believe that more, and better-targeted, help is needed,” they suggested.