China will continue to lead Asia's uneven recovery from COVID-19 economic disruption, accoridng to S&P Global Ratings. 

In a September 24 release, the independent credit rater noted that it has revised up its 2020 GDP forecasts for China as well as for Korea, Taiwan, and Vietnam amid stronger trade and consumer spending.

"We now expect normalization to take longer in India, Japan, Australia, and most of Southeast Asia. That's according to a report we published, titled "Asia-Pacific's Recovery: The Hard Work Begins," it said.

Worst economic impact over

"The pandemic is not over but the worst of its economic impact has passed," said Shaun Roache, Asia-Pacific chief economist for S&P Global Ratings. "Governments are adopting more targeted strategies for flattening COVID curves, with less recourse to nationwide lockdowns. Households are spending again on services as well as goods."

S&P noted that COVID-19 is proving hard to beat but fatality rates are falling and prospects have brightened for a widely available vaccine by mid-2021.

In the meantime, it said people are moving and spending more, testament to a world becoming accustomed to COVID-19. Trade, for example, has bottomed.

APAC region to rebound 6.9% in 2021

"As a whole, we expect Asia-Pacific economies to shrink by 2% in 2020 and rebound by 6.9% next year. This will still leave the region almost 5% below the pre-COVID trend by end 2021," Roache said.

"As relief measures taper, we will find out how much economic damage has been wrought."

Fading temporary tax cuts, wage subsidies, loan moratoriums, and other measures will force banks, businesses, and households to make hard decisions, he added. The true deterioration across balance sheets will become apparent even as economies reopen.

S&P explained that the employment situation will be a "key determinant" of the strength of recovery.

"We expect employment to return to pre-COVID trends only by 2022, at the earliest, in most cases. This will put a lid on wages, drag on consumer spending, and keep inflation low across the region," it added.

Trade, manufacturing to boost APAC rebound

Trade and manufacturing will contribute to Asia-Pacific's growth but a self-sustaining recovery will require a service sector rebound, the credit rater noted.

Of Asia-Pacific's 1.63 billion workers, about 270 million or 17% of the total, worked in manufacturing, based on International Labor Organization estimates for 2019.

S&P said this is a large number but it is only 7 million jobs higher than a decade ago. 

Meanwhile, about 18% of the total, or 300 million people, worked in the hospitality and retail sectors, an increase of more than 60 million jobs over the past decade. Other services account for more than 440 million jobs.

"Only when the service sector normalizes will the region get back to full employment," it added.