Economic growth to slow across APAC as coronavirus weakens demand and disrupts supply chains: Moody’s

• Lower Chinese import demand cited as primary reason 
• Says intra-regional trade amplifies impact of lower Chinese growth

Moody’s Investors Service said in a new report yesterday the coronavirus outbreak adds to other pressures on growth in Asia Pacific, with the impact felt primarily through trade and tourism, and for some sectors also through supply-chain disruptions. 

This shock comes on the back of a marked slowdown in 2019 as decelerating global trade hit the region.

The rating agency is forecasting 3.3 percent growth for Sri Lanka this year, up from estimated 2.6 percent growth in 2019.

“Our baseline assumption is that the economic effects of the coronavirus outbreak will continue for a number of weeks before tailing off and allowing normal economic activity to resume,” said Christian de Guzman, a Moody’s Senior Vice President. 

“We have lowered our China growth forecast to 5.2 percent for 2020 from 5.8 percent previously, reflecting a severe but short-lived economic impact, with knock-on effects for economies across the region,” added de Guzman. 

Specifically, Moody’s expects Macao and Hong Kong will face the biggest hit, given their close economic integration with China. 

The forecast revisions also incorporate updated views unrelated to the coronavirus outbreak, including weaker domestic demand in India and Thailand, as well as expectations of 
policy offsets.

“Reduced Chinese demand for the Asia’s exports and supply chain disruptions represent the two most direct transmission channels for slowing economic growth, although services trade adds a third channel.

“As such, goods and commodity exporters are most exposed to a protracted fall in Chinese demand, while tourism hubs that rely on Chinese visitors will also be vulnerable,” Moody’s said.