Asia-Pacific economies could face $291b losses this year

People walk past an electronic display showing the closing figure of the Hang Seng Index in Hong Kong, on Feb 28, 2020. PHOTO: EPA-EFE

HONG KONG • The coronavirus outbreak could wipe US$211 billion (S$290.9 billion) off Asia-Pacific economies this year, S&P Global Ratings warned yesterday, sending growth to its lowest level in more than a decade.

This warning comes amid further losses in the region's stock markets yesterday.

In a worst-case scenario, China could see growth of less than 3 per cent, while Japan, Australia and Hong Kong could "flirt with recession", S&P said in a report.

Besides Hong Kong, Singapore, Thailand and Vietnam would be the hardest hit, with tourism accounting for around 10 per cent of growth on average.

Fears about the impact of the outbreak, which has spread to at least 85 countries since it began in China last December, have hammered world markets as investors fret over its economic impact.

Asia shares fell yesterday, with Japan's Nikkei stock index sinking 2.7 per cent by the close, while South Korea's stocks fell 2.2 per cent. Singapore's Straits Times Index fell 1.9 per cent to 2,960.98, a new year's low.

Shares in China fell 1.2 per cent, while stocks in Hong Kong fell 2.3 per cent. Australian shares closed down 2.8 per cent.

Other regions were also hit. European shares opened sharply lower, with travel stocks bearing the brunt. United States stock futures yesterday pointed to further declines for Wall Street at the end of a roller-coaster week.

The MSCI All-Country World Index, which tracks shares across 47 countries, was down 0.7 per cent.

S&P said it expected the Asia-Pacific region to grow 4 per cent this year from the supply-and-demand shocks. That compares with a 4.8 per cent estimate last December, and would be the worst performance since a contraction in 2008 caused by the global financial crisis.

"Asia-Pacific's outlook has darkened due to the global spread of the coronavirus," it said. "This will exert domestic supply-and-demand shocks in Japan and Korea. It will mean weaker external demand from the US and Europe."

The report said economies were suffering from the double wham-my of weak demand as consumers stay home to avoid catching the virus and falling supplies as industries are rocked by shutdowns.

Still, S&P noted that economies would likely see healthy rebounds.

"A U-shaped recovery is likely to be delayed until the third quarter if signs emerge by the second quarter that the virus is globally contained," said the report.

"We assume that the coronavirus will not permanently impair the labour force, the capital stock or productivity - hence, the region's economies should be employing as many people and producing as much output by the end of 2021 as it would have done in the absence of the virus."

Yesterday, the Asian Development Bank also said it saw China taking a US$103 billion, or 0.8 percentage point, hit to gross domestic product, while losses could hit US$22 billion - or 0.2 percentage point - for other developing economies in the region.

"The magnitude of the economic losses will depend on how the outbreak evolves, which remains highly uncertain," said the bank.



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A version of this article appeared in the print edition of The Straits Times on March 07, 2020, with the headline Asia-Pacific economies could face $291b losses this year. Subscribe