Fitch, Moody’s see virus cutting Asia’s growth

By BusinessMirror, 6 Feb 2020

GLOBAL think tanks and credit watchers agree that the novel coronavirus (nCoV) now wreaking havoc on China and other countries in Asia-Pacific could dent economic growth in the region.

In separate pieces, Fitch Solutions—the research arm of Fitch Group, Moody’s Analytics—the research arm of Moody’s Group and S&P Global ratings evaluated the economic impact of the nCoV.

Only Fitch has specific figures as it projected that Asia-Pacific’s growth could decline to 4 percent this year, from 4.3 percent in 2019, if China’s economy would expand at a slower pace of 5.4 percent in 2020, from last year’s 6.1 percent.

“We lay out two possible scenarios that could impact Asian economies, and in both cases, we note that our initial view of a growth recovery in 2020, will be challenged,” Fitch said.

Moody’s said the first quarter GDP growth of China could be slashed by up to 2 percentage points and this could affect other countries that have close ties with the economic powerhouse.

“Using our model of the global economy, we estimate that, in the most likely scenario for the spread of the virus, the disruption caused by the coronavirus will cut more than 2-percentage points from China’s real GDP growth at an annualized rate in the first quarter of this year and 0.8-percentage point from growth for all of 2020.” Moody’s Analytics said. “The rest of Asia suffers the most from China’s struggles with 2019-nCoV.”

Moody’s also noted that the global economic of the new virus is expected to be larger than the economic impact made by the severe acute respiratory syndrome (SARS) pandemic, which also originated in China in 2003.

“The global economic impact of n-CoV is expected to be substantially more significant than that of SARS, primarily because China has gone from being a bit player in the global economy in the early 2000 to an economic powerhouse today,” it said.

“Back then, China accounted for just over 4 percent of global GDP, compared with 16 percent today. China has become an integral part of the global manufacturing supply chain, accounting for about one-fifth of global manufacturing output,” Moody’s added.

According to Moody’s data, SARS’ impact on the Philippines’s one-year real GDP growth was at -0.1 percent, while its 10-year impact was at -0.11 percent. Hong Kong was the most affected as its impact on GDP was estimated at -2.63 percent while India was least affected at -0.04 percent.

S&P Global Ratings said that while the situation is still developing, they forecast that the virus will be stopped on its tracks within the first half of the year.

“While the situation is obviously a fluid one, our base-case projection is that the coronavirus crisis will stabilize globally in April 2020, with virtually no new transmissions in May,” said S&P Global Ratings.

“Our worst-case projection holds that the virus stops spreading in late May, and optimistically in March. In turn, this suggests that the peak impact on economic activity across Asia-Pacific will be in the first and second quarters. Growth should stabilize later in 2020 and recover through early 2021 as the temporary effect on activity wanes,” it added.