A spreading coronavirus outbreak could erase $211 billion from the combined economies of Asia-Pacific this year, according to a stark report from ratings agency S&P Global that was released at the end of last week.
The respected market intelligence firm warned that Covid-19, the official name for new coronavirus, could slow GDP growth to 4.0% across the region, down from a previous estimate of 4.8%. “The loss will be distributed across households, firms, banks and governments,” the report said.
Growth in China, the epicentre of the disease, is expected to fall to 4.8% in 2020 with a “plausible downside scenario” of below 3%, compared to S&P’s previous estimate of 5.7% growth.
And all 14 markets under analysis are expected to be impacted, although Japan, Hong Kong, Singapore and Australia are said to be among the most exposed.
Thailand and Vietnam, where tourism – like Hong Kong and Singapore – accounts for about 10% of GDP, can also expect to get hit, with growth slowing to 1.6% in Thailand and 6.0% in Vietnam.
Hong Kong’s economy is likely to contract by -0.8%, Singapore is on course for zero growth, while Australia (1.2%), South Korea (1.1%), Taiwan (1.9%) and Thailand (1.6%) are all forecast to record growth below 2%.
“The hardest-hit economies remain Hong Kong, Singapore, Thailand and Vietnam where people flows are large. In all of these economies, tourism is a large share of GDP (almost 10% on average) and tourists from China account for a large share of visitors. Supply-chain exposure in the electronics and autos industries are also high,” the S&P report said.
“Australia is also a vulnerable economy and we expect a one percentage point hit to leave growth in 2020 at 1.2%, well below trend which is closer to 2.5%,” it added. “The initial spillover from the coronavirus came from people flows which were already depressed from the bushfires.”
And looking at Asia-Pacific overall, S&P Global warned that households are likely to respond to a greater risk of infection by avoiding public spaces, which will depress spending on discretionary goods and services.
“Even a small decline in this spending could have outsized effects on growth … As in China, this will hit the service sector, including small and midsized businesses, the current engine of job creation in these economies,” the report said. “For Japan and Korea, we expect the impact of the coronavirus be a hit of 0.5 ppt and 1 ppt, respectively.”
Sourced from S&P Global; additional content by WARC staff