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The emergence of a new Covid variant could lead to higher supply chain disruption risks in India and ASEAN than in North Asia, according to a research report by Morgan Stanley
"Demand will be affected across the region in the event of a tightening of restrictions. However, from a supply perspective, the disruption risks are higher in the economies of India and ASEAN. During the Delta wave, for instance, production activities in India and ASEAN were affected more than in North Asia. We could see a repeat," the report said.
Covid-zero strategy
China, Hong Kong, and Taiwan have maintained a Covid-zero strategy, limiting the near-term economic impact but delaying any reopening efforts and rebound in consumption growth. Australia, Japan, Korea, and Singapore have started to adopt a strategy of living with Covid. However, the new variant could lead to hospital and ICU capacity; it could also prompt a rollback of reopening measures. Hence, these economies are exposed to a risk of a setback in near-term growth.
" India and ASEAN have tended to tighten restrictions when cases rise sharply. So, if this variant proves to be as challenging than the Delta variant, or more, we see a high risk of selective lockdowns. That would have a bigger growth impact relative to group 2, though this may emerge later on," Morgan Stanley said.
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