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July 2020


5 - 7 Minutes

‘One of these countries is going to hit upon the mix’: Why the world needs to watch Asia-Pacific

As Visa’s Principal Asia-Pacific Economist, Glenn Maguire helps to identify the economic and behavioural trends shaping the future of commerce in the region. Here, he reflects on the shape of its economic recovery from the pandemic – and what lessons it holds for the rest of the world.

If one feature characterises the emergence from lockdown across the Asia-Pacific region, it is individuality, according to Visa’s Glenn Maguire, who has been tracking the response closely. “We talk of a global pandemic and a global lockdown. Yet, that lockdown is unwinding in a very country-specific way, in terms of what approaches countries are taking, but also in terms of how consumers and merchants are responding.”

It is throwing up some interesting, not always predictable behaviours. For instance, in China, on the first weekend after mobility restrictions were wound back, Hermes had the highest ever revenue take of a luxury brand in China on that weekend. In contrast, in Singapore, McDonalds experienced long lines as people queued to buy their favourite burger again. “In Singapore, the immediate purchase was for a familiar meal; in China, it was for a reward, a luxury good,” notes Glenn. “The per capita income gap would suggest that the response should have been the other way around – societal factors are at play here, not just financial.”

Of course, consumers and merchants are responding to their governments’ actions, which vary hugely. “There is this perception that Asia is leading the way in these mobility wind backs because most of the region is ahead of Europe in limiting the spread of the virus, but in fact, it's probably displaying a little more caution than European countries,” says Glenn. “In terms of the countries that have started to open up, the key finding is just how individual their responses have been.” Singapore, for example, is still moving out of restrictions in a phased way; Vietnam started easing them as early as April. That variety is a potential advantage and a possible source of learning for countries around the world.

“One of these countries is going to hit upon the mix of rollbacks that maximises the economic recovery, but minimises the public health risk. That will then become the template that others follow.”

Seeking a winning strategy

Success stories are already emerging. In an update to the stock market at the start of June, Visa’s 8-K filing reported that New Zealand was among the few markets, which had positive year-over-year growth in May. “A strict lockdown was put in place quickly and it was successful,” says Glenn. “And it's not surprising that you're seeing that performance as a result. If consumers expect to have a smooth handover from an epidemic recovery to an economic recovery, then they're probably more likely to return to some of their more expensive discretionary spending.”

As well as consumer confidence, economies’ readiness to turn to ecommerce is proving key. Hong Kong and Singapore, both with high financial inclusion, saw consumers able to move swiftly from physical transactions to ecommerce. “The ability to rotate face-to-face to online spending in Singapore occurred almost simultaneously with the decline in mobility,” he says. “But in a country where a large percent of the population is not financially included – say, where they may not have credentials on file with a financial institution – it becomes very hard to make that switch.”

Small powerhouses

Bigger isn’t always better when it comes to the pace at which cities in Asia are recovering from lockdowns. “The reopening could be skewing to smaller cities,” says Glenn. “If you look at countries like Malaysia and Vietnam where manufacturing production is located outside of large capital cities, the PMI surveys show they have now recovered and are at higher levels than pre-COVID. Similarly, Google mobility data shows that smaller merchants appear to be reopening sooner than their large competitors. Businesses that closed over the lockdown period have now reopened – they tend to be smaller firms that don't carry a lot of inventory, he says. Those dependent on the international flow of goods may take longer to restock, he explains; so bigger merchants and larger cities which tend to see more spending on higher-priced, internationally sourced goods could need more time to reopen fully. “That's important,” adds Glenn. “If the recovery is concentrated in the lower end of the price scale, then it's going to probably look lower and slower than it actually is.”

The shift to suburbinisation

The recovery is also ushering in major behavioural change as daily life focuses more on the home and people’s movements remain localised. Visa has reported that global cross-border ecommerce (excluding travel) continued to grow strongly in May, up 18% year-over-year1. “To a large extent, this reflects content and streaming,” says Glenn, while consumers have also been upgrading technology to adapt their homes for work. That is not a shift that he expects to reverse suddenly, noting that in countries where Ikea has reopened it has seen a surge in sales, as people prepare their homes to continue as places for both work and leisure. “It's going be interesting to see to the extent dynamics like localisation play out – or, suburbanisation,” he says. “The CBD (Central Business District) is probably going to continue to look empty over the normalisation phase, while you'll see these pockets of more vibrant socialisation occurring in the suburbs around that.”

Bubbles of potential

Of course, it won’t just be our daily lives that become more localised, with international travel remaining one of the most disrupted sectors. Countries have been working on travel agreements – variously dubbed travel bubbles, green lanes, or air bridges – that allow easier, smoother movement between them. Recently Singapore and China announced an arrangement for limited essential travel that started on June 8. Since most of the Southeast Asian and North Asian continent has been showing a similar incidence of the virus, Glenn suggests they could eventually form an air bubble. “And the other bubble that is potentially forming is in Europe. Potentially those two bubbles – and Australia and New Zealand, of course – can open up 2 billion travellers.”

What will limit the travel recovery is how quickly airlines can bring travellers back on board, and their need to maximise cash flow. “Travel is going to be characterised by fairly high prices in the first stage of the recovery, which tends to reinforce this notion that it’s going to be driven by business travellers,” says Glenn. “The repair of the supply chains is going to take time, given how complex production has been. And I think the most immediate need will be business-related travel in the goods sector. Then you're going to see services travel start to take off. After all that you have leisure travel.” A rise in domestic tourism could also further push back the recovery here, he adds.

How to adapt for the new normal


Expect the unexpected.

“Introspection has been a function of lockdown,” says Glenn. “Consumers have examined their behaviours in terms of work-life balance, which is lending this degree of uncertainty to how they come out of it. That’s explaining how situational and individual a lot of the consumer and merchant responses are.”


Companies will find their own data increasingly important, while the collection of economic information has been disrupted.

“The ability to actually collect even that soft survey data that policymakers and officials have been so dependent on has really been strained. That's why you'll see more of a focus on companies looking at their own data, to glean signals from that.”


Sharing knowledge mitigates risk.

“In many ways, we're looking to Europe for lessons as much as they are looking to us for lessons on this,” says Glenn. “The element of surprise is reduced, as long as there is this continuation of collaboration, sharing and the recognition of the power of networks.”

The shape of the future

So, does all that signal a more domestic economic focus? Supply chains have not “magically domesticated or regionalised” during lockdown, Glenn cautions. “In the first instance, merchants are just going to sink more money into inventories, in case this type of disruption occurs again.” Services, meanwhile, will have a new focus. “There'll be a pivot to the very high end, continuing to build upon this digital acceleration. But then at the other end, I think you're going to see services and financial services return to what has been their traditional role of being the handmaiden of industry.”

Yet, don’t expect economies to drastically reshape themselves. “A country like Singapore can’t really move to a domestic supply chain or agricultural production. A country like Thailand can't really pivot away from its dependence on tourism. Ultimately, the post-COVID equilibrium is a return to what makes each country in Asia unique from an economic perspective.” And that process is already under way. “When you look at the policies Vietnam is following in terms of opening up, the travel corridors it's looking at are aligned with its major supply chains. The policy steps are focused on normalising the existing economic structure.”

“There's not this revolutionary element of dramatically restructuring your economy, trying to guess what 2030 looks like. It's very much incremental and evolutionary. The new normal is essentially going to be the old normal – moved three-to-four years forward.”

Glenn Maguire is the Principal Asia Pacific Economist for Visa. In this role, he provides economic analysis, insights and forecasts of the region’s economics for Visa executive, country managers and clients. Based in Singapore, Glenn heads the Asia Pacific Business and Economic Insights team with the key goal of deepening client engagement and thought leadership in payments and the consumer economy. An active participant in the World Economic Forum’s Future of Consumption (Fast Growth Markets) System Initiative, Glenn helps to identify the economic and behavioural trends shaping the future of commerce in Asia.

All brand names, logos and/or trademarks are the property of their respective owners, are used for identification purposes only, and do not necessarily imply product endorsement or affiliation with Visa.

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