The International Monetary Fund (IMF) expects the pandemic to sink world gross domestic product (GDP) by 4.4% this year. The most notable exception is China, which has an estimated 1.9% real GDP growth in 2020. On top of that, it is forecast to grow by 8.2% in 2022. Far from bearing the economic scars of Covid-19, it is set to bounce into next year with pre-pandemic growth rates.
China’s resilience is also shoring up growth in the region, particularly in Vietnam and Bangladesh, and is felt as far as Guinea, where Chinese demand for mining commodities is enough to propel the African country through the pandemic. Rising oil star Guyana remains in a league of its own with a stellar 26% GDP growth expected for 2020, although the South American country appears on a wild boom and bust ride, and faces a considerable fall next year.
From export to consumption growth
Two main factors in Beijing’s handling of the pandemic are behind the recovery in consumption, Larry Hu, economist at Macquarie Capital, wrote in a recent report.
For one, Beijing imposed probably the “most draconian controls in the world”, which caused a sharp economic contraction. But as helped contain the pandemic in the first instance and enabled social life to return to normalcy thereafter; now consumer spending has come back on a tailwind of production growth.
Rather than handing cash to households, Beijing forced banks to lend mostly to the corporate sector. The People’s Bank of China has lowered policy rates, provided liquidity to the banking system, and targeted small and medium-sized businesses.
In keeping with the country’s remarkable rise since the 1980s, president Xi Jinping said during the party plenum in early November that it is “entirely possible” that the economy will double again from 2020 to 2035.
Over in neighbouring Vietnam, GDP growth is expected to slow to 1.9% in 2020 and bounce back to 6.7% in 2021, the IMF estimates.
Combined with an assertive strategy to control the pandemic, stronger execution of public infrastructure investments and the rapid recovery of China, its second largest trade partner, have helped sustain the country’s growth.
Vietnam’s trade, which has diversified from its low-tech base of textiles and footwear to higher tech manufacturing goods, remains broadly resilient, the IMF says, in line with strong global demand for pharmaceutical products and electronics.
Fellow manufacturing hub Bangladesh saw GDP growth slow to 3.8% in 2020, down by more than half of the previous year, following the initial stages of the Covid-19 outbreak, IMF figures show. Growth is expected to pick up moderately to 4.4% in the next fiscal year.
With lockdown lifted and external demand slowly recovering, exports and remittances are showing signs of recovery, growing by 2.6% and 49%, respectively, year-on-year in the July-to-September quarter, according to IMF figures.
Beijing also declared zero-duty for 97% of its Bangladeshi imports in July.
While, in developed economies, talk of renewables and mid-century carbon cutting have intensified, oil still stands at the heart of GDP growth in several developing countries. Nowhere is this more true than in the case of Guyana, where the discovery of deepwater oil fields has heralded exponential growth.
The small, historically poor Latin American country tops the IMF’s list at an expected 26.2% real GDP growth in 2020, revised down from the 2019 prediction for the year of 86%.
As an operator in three blocks in offshore Guyana, ExxonMobil has sanctioned three projects, the first of which achieved oil in December last year and is currently producing roughly 95–100,000 barrels per day.
Despite this, the IMF predicts that Guyana’s 26.2% real GDP growth will drop to 8.1% in 2021 before jumping back up to 29.5% in 2022.
In September 2018, Chinese foreign minister Wang Yi visited the Caribbean country, which pledged co-operation with China’s Belt and Road Initiative.
China-backed mining revival
By contrast, Guinea, another poor country rich in natural resources, has benefitted from its extended credit facility agreement with the IMF over the past three years, which has totalled roughly $117.6m in disbursements.
However, the country’s mining sector — bauxite and artisanal gold production in particular — is expected to grow at 18% this year, boosted by high gold prices and a faster-than-anticipated pick up in Chinese demand.
As a result, Guinea’s economy is expected to grow slightly above 5% this year and continue this trend into 2021, as mining remains robust and non-mining activity picks up, the IMF predicts.