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The Covid-19 pandemic and supply chain disruption is continuing to hamper the global economic recovery, with Japan and Thailand’s economies both contracting in the last quarter.

Japan’s economy shrank by 0.8% in the third quarter of this year, new figures show, a deeper fall than expected as global supply disruptions hit exports and business spending plans.

The rise in Covid-19 cases this summer, which led to emergency soft lockdown measures in Tokyo and other regions, also hurt the recovery. Private consumption fell 1.1% during the quarter.

Capital expenditure by companies slumped by 3.8%, with some manufacturers such as carmakers struggling to obtain raw materials and parts.

The contraction suggests that the world’s third-largest economy is being hit harder than expected by production bottlenecks, which continue to grip the global economy.

Economists had only expected Japan’s GDP to fall by 0.2% during the quarter.

As Takeshi Minami, chief economist at Norinchukin Research Institute, put it

“The contraction was far bigger than expected due to supply-chain constraints, which hit car output and capital spending hard.”

Economists predict that Japan’s economy will return to growth this quarter. But the sharp fall in Q3 GDP could also spur prime minister Fumio Kishida to unveil a significant stimulus package soon.

Alvin Tan of RBC Capital Markets says:

Japan’s Q3 GDP was weaker-than-expected at -3% q/q annualised, which should provide added impetus for the proposed fiscal stimulus package. A package of over ¥40 trillion is reportedly being considered.

Thailand’s economy has also been hit by Covid-19 curbs this summer, which hit its tourism sector.

Thailand’s GDP shrank by 1.1% during the third quarter of the year – which is actually rather better than the 2.5% contraction which economists were bracing for. It left the economy 0.3% smaller than a year ago.

Exports in the third quarter grew 15.7% from a year earlier, but private consumption fall by 3.2%, hit by pandemic restrictions.