Moody's: COVID-19 weakens demand, disrupts supply chains in Asia Pacific

KUALA LUMPUR, Feb 18 -- Moody's Investors Service opines that the COVID-19 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.

The credit rating firm, in a new report today, said the shock comes on the back of a marked slowdown in 2019 as decelerating global trade hit the region.

"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.

"We have lowered our China growth forecast to 5.2 per cent for 2020 from 5.8 per cent previously, reflecting a severe but short-lived economic impact, with knock-on effects for economies across the region," Moody's senior vice president Christian de Guzman said.

Specifically, Moody's expects Macao (Aa3 stable) and Hong Kong (Aa3 stable) will face the biggest hit, given their close economic integration with China (A1 stable).

The forecast revisions also incorporate updated views unrelated to the coronavirus outbreak, including weaker domestic demand in India (Baa2 negative) and Thailand (Baa1 positive), as well as expectations of policy offsets.

Reduced Chinese demand for 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, said Moody's.

-- BERNAMA