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As China is an economic behemoth, with a gross domestic product (GDP) of almost US$14 trillion in 2018 – accounting for about a fifth of global GDP based on purchasing power parity, according to the World Bank – and with 68 million Chinese tourists travelling internationally last year, countries are bracing themselves for a hard hit to tourism, services and manufacturing. Stock markets have already suffered.
Amid the worries, however, some analysts say the outbreak will have only a short-term impact on Asian economies…
Excerpts from:
Can Asian economies survive the coronavirus?
- Businesses dependent on Chinese factories and visitors are already feeling the pinch, with some countries implementing stimulus measures
- While some experts predict a recovery once the virus’ spread is curbed, others caution that it is still too soon to assess how large an impact it could have
Published: 12:00pm, 8 Feb, 2020
Updated: 12:00pm, 8 Feb, 2020
For Eilynn Lew, founder of bathroom fixtures company Eilumina, the start of the year is usually a busy time. There are trade shows in Europe to attend and business deals to sign, then a rush to manufacture and ship out goods from China. This year, however, she is grounded in Singapore, unsure if she will be able to fulfil orders because the Chinese factories she uses are not operating.Daily life and business operations in China have been drastically curtailed as the authorities try to limit opportunities for human-to-human transmission of the novel coronavirus. Some companies have resumed operations and others say they will do so next week, after the extended Lunar New Year break.
But with reports of infections and deaths continuing, businesspeople like Lew are worried about when things will return to normal. “If they don’t return to work in the factories soon, we’re all screwed,” she said.
Lew’s worst-case scenario is that factory output cannot keep up with demand and she will lose out on revenue and fork out up to S$80,000 (US$58,600) in overheads each month. “We can only wait and see, there’s nothing much we can do.” Across the region, fears of trade and supply-chain disruptions are rising. Thailand Development Research Institute analyst Nonarit Bisonyabut said if China’s economy slowed, Thailand would not be able to sell as many computer and electronic parts, chemical products, rubber and plastic to one of its biggest trading partners.
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In a bid to limit the spread of the disease, China has locked down some cities and banned outbound tour groups, and countries from the United States to Singapore and Australia are closing their borders to travellers from the mainland.
As China is an economic behemoth, with a gross domestic product (GDP) of almost US$14 trillion in 2018 – accounting for about a fifth of global GDP based on purchasing power parity, according to the World Bank – and with 68 million Chinese tourists travelling internationally last year, countries are bracing themselves for a hard hit to tourism, services and manufacturing. Stock markets have already suffered.
Australian National University economics expert Warwick Mckibbin estimates the global impact from this outbreak will be three to four times that of Sars’ US$40 billion blow in 2003, when China’s GDP was just 9 per cent of global GDP. Economies also have a lower baseline now, as the US-China trade war has already been a drag on global growth.
Fitch Ratings said if the outbreak – first reported on December 31 last year – lasted for three months, the economic impact would be more severe than Sars due to the lockdowns in place that would affect the services industry.
Nomura researchers are expecting China’s real GDP growth in the first quarter of this year to plunge by “perhaps bigger than the 2 percentage points registered during the Sars outbreak”, while Bloomberg economists are expecting year-on-year growth to slip to 4.5 per cent.
In a January report, Maybank Kim Eng researchers said Singapore and Thailand were likely to be the most affected in the Association of Southeast Asian Nations (Asean) because they were more open and dependent on Chinese trade and tourism. They said Malaysia and Vietnam would probably see a smaller impact, with Indonesia and the Philippines the least affected.
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TROUBLE FOR TOURISMThe coronavirus outbreak is a black cloud looming over the tourism industry, as China is the world’s largest market for outbound travel. China is Thailand’s largest source of foreign visitors; about 11 million Chinese visited the country last year, generating income of 550 billion baht (US$17.6 billion).
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In Australia, Treasurer Josh Frydenberg has warned that the virus will have a significant impact on the economy. He said the virus was costing the tourism industry A$1 billion (US$668 million) a month and damaging other industries too, impacting the number of international students and the seafood export business.
In Japan, where a third of all inbound tourists come from China and account for nearly 40 per cent of tourism spend, an economist has forecast an economic hit of almost 200 billion yen (US$1.85 billion).
In Singapore, the authorities said the number of Chinese tourists had fallen 80 per cent since China imposed restrictions on outbound tourism. The city state is preparing a fiscal package to deal with the virus’ impact on the economy, and has already announced a set of measures for the tourism sector, including waiving licence fees for hotels, travel agents and tour guides. Government ministers have promised more help to tide over airlines and airport businesses in Singapore’s 2020 budget, to be unveiled on February 18, and to speed up major transport and infrastructure projects.
TIPPING POINT?
Alex Feldman, president and chief executive of the US-Asean Business Council, said American businesses were worried about the economic impact of the outbreak.
“As we found out with the US-China tariff war, supply chains can’t get reinvented overnight,” he said. “You can’t just pick up a several hundred million- or billion-dollar factory and plop it down somewhere else. These things take time to build, the real estate takes time to get, the licences take time to get. So, the longer this takes, the more impact there will be and there is already an impact today.”
Amid the worries, however, some analysts say the outbreak will have only a short-term impact on Asian economies…
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https://www.scmp.com/week-asia/economics/article/3049604/can-asian-economies-survive-coronavirus
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