You are here

VIRUS OUTBREAK

Asia-Pacific economies face US$211b hit from virus: S&P

China could see growth of less than 3%, while Japan, Australia and Hong Kong could 'flirt with recession'

BT_20200307_HK_4054348.jpg
Hong Kong, which suffered its first recession last year since 2008, was tipped to shrink further.

Hong Kong

THE novel coronavirus could wipe more than US$200 billion off Asia-Pacific economies this year, S&P Global ratings warned on Friday, sending growth to its lowest level in more than a decade, as governments struggle to combat the disease.

In a worst-case scenario, China could see growth of less than 3per cent, while Japan, Australia and Hong Kong could "flirt with recession", it said in a report. Fears about the impact of the outbreak, which has spread to at least 85 countries since it began in China in late December, have hammered world markets as investors fret over its economic impact.

S&P said it expected the region to grow 4 per cent this year as supply and demand shocks blow a US$211 billion hole in the economy. That compares with a 4.8 per cent estimate given in 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-whammy of weak demand as consumers stay home for fear of catching the disease, and falling supplies as industries are rocked by shutdowns.

It saw China's economy - which was already stuttering before the crisis struck - expanding 4.8 per cent this year, which would be the worst in three decades.

However, it added that in the worst case, which "assumes localised reinfections as people return to work and the re-imposition of some restrictions on activity" growth could crash to just 2.9 per cent.

Hong Kong, which suffered its first recession last year since 2008, was tipped to shrink further.

The city, along with Singapore, Thailand, and Vietnam, would be the hardest hit, with tourism - which has been battered globally - accounting for around 10 per cent of growth on average. Still, S&P did say 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," the report said.

"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." AFP