“The wider global spread of COVID-19 will prolong the economic fallout in Asia-Pacific. Some economic activities will be lost forever, especially for the service sector. The hardest-hit economies will be Hong Kong, Singapore, Thailand and Vietnam, where tourism accounts for a large part of GDP — almost 10% on average.”
In addition, S&P Global trimmed its growth forecast for China from 5.7% for 2020, to 4.8%
The coronavirus crisis could wipe out $211 billion from economies across Asia Pacific, according to a report published last Friday (March 6) from S&P Global Ratings.
Australia, Hong Kong, Singapore, Japan, South Korea and Thailand “will enter or flirt with recession,” the ratings giant said. S&P Global also trimmed its growth forecast for China from 5.7% for 2020, to 4.8%.
The coronavirus outbreak, which first started in China, is now spreading globally. There are now at least 113,000 confirmed cases and 4,000 deaths worldwide, according to the latest numbers from the World Health Organization. Outside China, the countries most affected by the outbreak are South Korea, Italy and Iran, which have the highest numbers of cases.
“The wider global spread of COVID-19 will prolong the economic fallout in Asia-Pacific,” S&P Global said, referring to the new coronavirus by its official name. “The loss will be distributed across households, firms, banks, and governments.”
“Some economic activities will be lost forever, especially for the service sector,” it added.
The hardest-hit economies will be Hong Kong, Singapore, Thailand and Vietnam, where tourism accounts for a large part of GDP — almost 10% on average, the report said. Tourists from China account for a large share of visitors in those countries, S&P Global added.
These economies are also highly exposed to any supply chain risks in the electronics and autos industries, the report said.
In China, factories are gradually restoring production, but supply chains have been significantly disrupted as many companies have key manufacturing facilities there.
Meanwhile, demand in many countries has been hit as consumers cut back on going out to shops and restaurants. The tourism and travel sectors have been severely affected as consumers cancel holidays, and companies postpone all non-essential trips. That has sent airline stocks plummeting.
|Passengers with protective facemasks walk with their luggage in the empty arrival hall of Noi Bai International Airport
in Hanoi, Vietnam.
Globally, airlines could lose up to $113 billion in revenue this year, the most since the financial crisis, if the disease continues to spread, the International Air Transport Association forecast on Thursday.
“The demand shock is centered on consumers who are either unable or unwilling to venture out in public or travel overseas,” S&P Global wrote. “The supply shock relates to the inability of firms to continue operations because facilities have been disrupted by government restrictions or infection of employees.”
However, economies could bounce back by the end of 2021 if signs emerge by the second quarter this year that the virus is contained worldwide, S&P Global said.
“We assume that the coronavirus will not permanently impair the labor 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,” the report said.
The report notes that, one “big amplifier” of the shock to economies would be financing conditions, S&P Global said, singling out the availability of financing for borrowers as a key risk. It pointed out that volatility has risen, and stocks are tumbling. “If this makes banks more cautious in their lending, this could amplify the real economic shocks in Asia-Pacific.”