KUALA LUMPUR: Asia Pacific is expected to grow faster this year and 2022 than the Middle East and North Africa (MENA) and Latin America, according to Moody's Investors Service.
The performance, however, would increasingly diverge within the region, Moody's said.
The rating agency said Asia Pacific's growth would rebound 6.7 per cent this year following a contraction of 0.8 per cent in 2020, as the global recovery further solidified and pandemic containment measures relaxed gradually.
The rebound in overall economic activity will be fuelled in large part by China, covering a range of output losses across the region.
Moody's assistant vice president and analyst Deborah Tan expects about 30 per cent of Asia Pacific economies to face a modest degree of scarring, experiencing an output decline of 2.0 per cent to 8.0 per cent below the firm's pre-pandemic forecast gross domestic product (GDP) levels by 2023.
"These include mainly lower-to-upper middle-income economies and those struggling to contain a virus resurgence, such as Malaysia (A3 stable), Indonesia (Baa2 stable) and Thailand (Baa1 stable)," she said in a statement today.
Moody's believes economies with the deepest scarring generally had concentrated economic structures or weaker institutional capacity to support the recovery.
More than 40 per cent of economies in the region will have output losses exceeding 8.0 per cent of pre-pandemic GDP forecast levels.
"Most economies in this group have lower-middle incomes, and deep scarring will likely lead to higher social risks. In some of these economies, high debt burdens are limiting the fiscal space for governments to respond to the pandemic," Tan said.
Moody's said economies that experience no scarring had generally mounted effective health responses and provided more fiscal support.
"Nearly 30 per cent of Apac's economies will record strong post-pandemic growth and return to pre-crisis levels of GDP by 2022 or 2023. Economies in this group are mainly high income and have mature institutions, strong healthcare infrastructure and dynamic labour markets."
Moody's said secular trends accelerated by the pandemic could affect depth of scarring beyond 2023 as Covid-19 has accelerated automation and trade regionalisation, which could have longer-lasting effects on social risks and the reallocation of investments across countries.
"Overall, we find that economies with stronger institutional frameworks, more flexible labour markets and dynamic business environments have been able to respond to the crisis more effectively, which limits economic scarring. Not surprisingly, these economies also score higher in terms of overall global competitiveness."
Moody's said economies that will incur some scarring range from those with moderate exposure to tourism to those struggling with new infection waves.
"Across the region, Covid-19 vaccination progress has been slow but is now gathering pace. In particular, a number of economies in this group have seen a resurgence in infections, such as Malaysia, Indonesia and Thailand."
Moody's said these economies were likely to reopen more slowly.