Southeast Asian banks are seeing rising non-performing loans (NPLs) this year, as forbearance periods sputter out and the real impact of the Covid-19 pandemic on businesses and individuals becomes clearer. But this is hardly going to be another 1997/1998 Asian financial crisis, with double-digit NPLs, bank collapses, corporate bankruptcies, crashing currencies and soaring public debt. In general, the region’s central and commercial banks have learned their lessons from the 1997 crash and have plenty of buffers to weather this comparatively mild storm.
This is not to say that the Covid-19 crisis has been a painless one. With the exception of Vietnam, all the southeast Asian economies saw contractions in 2020, along with rising unemployment and upticks in poverty. The Philippines’s economy led the region with a 9.5% shrinkage in its gross domestic product (GDP) last year, thanks to several waves of Covid-19 outbreaks and subsequent lockdowns, especially in the capital Manila. Thailand, while performing fairly well in containing the pandemic’s spread, has done less well in containing the resulting economic malaise. Its GDP contracted 6.1% last year and is heading for a slow recovery of 2–3% in 2021, due to an over-reliance on the tourism industry which accounts for 18% of GDP (12% of that from foreign tourists who have all but disappeared).