Second wave unlikely to completely derail recoveries

Having been among the fastest in the world at controlling the initial outbreak, Hong Kong, Vietnam and Korea are all at different stages of a second wave of infections. With new infections in Hong Kong down from three-figures at their recent peak in late July to only a dozen or so now, restrictions will be eased on Friday with cinemas allowed to reopen and restaurant dining hours extended. Vietnam has successfully managed to bring new cases down to a handful a day in less than a month and a loosening of restrictions there looks imminent. Korea’s second wave is at an earlier stage, but new infections have been lower so far this week than their weekend peak. Overall, these second waves look likely to be relatively brief. The economic hit is likely to be biggest in Hong Kong, where private consumption is a larger part of the economy than elsewhere. But Google mobility data show that the movement of people has started to recover, suggesting that consumer spending is already rebounding there. It’s a similar story in Vietnam. What’s more, the recoveries in industry and exports appear to have carried on unabated. The data are still on a downward trend in Korea but should bottom out soon if the authorities are able to bring cases under control in the next couple of weeks. The upshot is that second waves are likely to set back rather than completely derail recoveries, and all three economies are set to rebound strongly in the quarters ahead.