Bangkok: Fresh outbreaks of the Delta coronavirus variant in South-east Asia have crippled its factory sector, disrupting global supplies of goods such as rubber gloves, semiconductors and cars and threatening the US$3 trillion region’s recovery.
A series of factory surveys this week showed business activity across most South-east Asian economies fell sharply in July, a contrast to more resilient manufacturing economies in North-east Asia and the West, where business growth has slowed but remained in expansion, report agencies.
The setbacks threaten the growth of one of the world’s more resilient emerging market blocs, which has withstood various global crises in recent decades thanks to broad robust economic reforms and its proximity to China.
HSBC economists warn the low inoculation rates in Indonesia, Vietnam, the Philippines and Thailand, as well as the uncertain efficacy of their vaccines, put their economies at risk.
“This means that populations in these countries could remain vulnerable not only to the current outbreak, but any future mutations that may develop,” HSBC said. “Touch-and-go restrictions are likely to continue, weighing on the near-term growth outlook.”
For South-east Asia’s manufacturers, which are competitive largely because of low-cost labour and access to raw materials, the impact of new outbreaks on labour supply has been a major production bottleneck.
In Thailand, Asia’s fourth-largest auto exporter and a production base for major global car brands, Toyota Motor Corp suspended production at three of its plants in July due to parts shortages caused by the pandemic.