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KUALA LUMPUR, April 21 -- As COVID-19 continued to weaken the global economy, economic spillovers from country-specific shocks are quickly escalating into second-round of shocks that dampened Asia Pacific’s recovery from the pandemic.
Moody’s Investors Service its report released today said the crisis is manifesting itself through country-specific and regional and the government relief measures though swift and extensive, will not be enough to offset the effects on the economy.
“Widespread containment measures are crippling domestic consumption and production, which is spilling over to other parts of the region in the form of lower demand for commodities, imported goods and services and supply chain disruptions,” said its assistant vice president Deborah Tan.
This is while China has resumed economic activity and production while other economies are still grappling with the spread of the virus.
“Slower economic growth will weigh on the resumption of supply chains and trade flows, particularly for tourism and retail,” she said.
Moody's added that although Asia’s external and fiscal buffers are generally more robust than those in other regions, their responses to date will only cushion some of the impacts and not fully offset the economic and credit damage.
“COVID-19 is exposing vulnerabilities in existing systems and we expect policy space to be constrained for economies with existing fiscal challenges or elevated external vulnerabilities,” she said.
Meanwhile in its report, Moody’s had pointed out that only Malaysia and Australia had allowed withdrawal from pension funds while taking other measures such as debt repayment holiday, monetary policy easing, wage subsidies, credit guarantees, tax and social relief as well as direct cash to the household.
It added that the pandemic had also exposed the vulnerabilities in existing systems, as it expects policy space to be constrained for those with existing fiscal challenges or elevated external vulnerabilities, or both.
“Weaker global growth and heightened risk aversion in financial markets have led to significant capital outflows from the region. Countries with twin fiscal and current-account deficits are already experiencing bouts of currency weakness,” it said.
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