Singapore economy expected to shrink 0.6% in Q1: Poll

The effects of the coronavirus outbreak are likely to reverberate beyond China as most major economies in the region are expected to slow down significantly, halt or shrink in the current quarter, Reuters polls of economists found.

Singapore is forecast to be the worst affected, with growth dropping by more than 1 percentage point for this year. The least impact would be on Indonesia, which is expected to grow 4.7 per cent this year.

Singapore is expected to contract 0.6 per cent this quarter, a first since the 2009 recession after the global financial crisis.

Many Asian economies, limping back to growth from the spillover effects of the 18-month United States-China trade dispute, were again dealt a blow by the outbreak, which has shut down businesses and cities.

With the contagion interrupting global supply chains that most countries depend on for trade and commerce, economic activity is likely to slow, but at varying degrees.

Forecasts from economists collected from Feb 19 to 25 showed that Singapore, Australia, South Korea, Taiwan and Thailand are all expected to put in their worst performance in years in the first quarter.

"The impact of the coronavirus on economies in Asia is potentially huge, as tourism in the region takes a beating. From deserted hotels to empty airports, the impact... on economies in the region is potentially enormous," said Mr Robert Carnell, chief economist and head of research for Asia-Pacific at ING in Singapore.

"If this doesn't sound sufficiently scary, bear in mind that tourism is just one of the channels through which the coronavirus can weaken the GDP growth of Asian countries grappling with this epidemic."

A similar Reuters poll about a week ago found the Chinese economy will grow at its slowest pace this quarter since the financial crisis, with a worst-case scenario of 3.5 per cent, nearly half the 6 per cent in the fourth quarter of last year.

"The base case is rapidly shifting from 'bad', meaning only China is impacted, to 'ugly', where both emerging Asia and developed economies see soaring infection rates and deaths," said Mr Michael Every, head of financial markets research for Asia-Pacific at Rabobank in Hong Kong. "Its effects will likely resemble the global financial crisis of 2008 to 2009 more than the Sars outbreak in 2003."

On Monday, world stocks nosedived to a two-year low as a surge in virus infections outside China fuelled fears of a global pandemic.

A bounce back next quarter is expected for most major Asian economies polled, but growth this year is likely to be lower than predicted last month, suggesting some activity would be permanently lost.

While South Korea was hardest hit by the virus outside China, its impact on the economy seems modest, according to forecasters who expect it to grow 2.1 per cent in the first quarter, down 0.4 percentage point from a January Reuters poll.

The economies of Thailand and Taiwan are forecast to expand at 0.2 per cent and 1.3 per cent, respectively, this quarter, the lowest in nearly five years.

In a worst-case scenario, economists expect growth in all countries polled to drop further by 0.5 percentage point to 1 full percentage point.

REUTERS