The delta variant is challenging the part of the world that’s been most successful in blunting the economic impact of Covid-19, with Asian countries that snuffed it out locking down again as the virus returns, and others seeing the world’s highest death rates. Just 12 months ago, the Asia-Pacific region’s rapid containment of Covid-19 made them the envy of the world as the virus ravaged the U.S. and Europe. Now, from Seoul to Sydney, Bangkok to Beijing, authorities are reimposing growth-sapping restrictions as low vaccination rates in many of those places leave their populations vulnerable.

 

So far, it’s consumers who are bearing the brunt. The central bank in Australia, where two-thirds of the population are confined at home after delta slipped through the strict travel quarantine system, estimates spending drops about 15% during lockdowns.

China is imposing internal travel and movement restrictions in the middle of the summer break as infections return to places like Wuhan and Beijing, prompting reductions in forecasts for growth in the world’s second-biggest economy. China reported 95 new local coronavirus cases, with delta reaching regions that account for 38% of national gross domestic product.

Delta’s Shadow

Mainland China is battling an outbreak driven by the delta variant

Sources: National Health Commission, Bloomberg News

Note: Data shown is between July 21, when Nanjing’s cluster was first reported in the national tally, and Aug. 5

Supply chains from Vietnam to Thailand, where outbreaks are surging, have also been interrupted, with factories that make goods for Nike Inc. and Adidas AG shutting down over virus restrictions, potentially missing out on the crucial holiday shopping season. That raises the prospect of Asia’s delta hit reverberating worldwide if exports are delayed longer term. The current delta wave in Asia may snarl production networks further,” said Frederic Neumann, co-head of Asian economic research at HSBC Holdings Plc in Hong Kong. “The risk is that growth scars linger for longer.”

The deterioration in outlook, both for virus containment and economic growth, is in contrast to western economies like the U.K. where high vaccination rates are blunting the impact of delta and travel reopening is progressing.

There’s a common theme among many Asia-Pacific economies that enjoyed early success with limiting the virus’s damage: complacency. With fatalities low, authorities in South Korea, Japan, Australia and New Zealand are among those whose vaccine rollouts lagged behind; their inoculation rates are now in the bottom 10 among the 38 OECD member states.

All except New Zealand have been hit by delta, with infections over the last month surging roughly threefold in South Korea, quadrupling in Japan and climbing more than 600% in Australia. The outbreak has worsened across Australia’s biggest cities, with cases in Sydney and Melbourne hitting fresh highs for the current outbreak.