The coronavirus crisis could cost economies in the Asia-Pacific region $211 billion this year, sending growth to its lowest level in more than a decade as governments struggle to combat the disease, S&P Global Ratings warned on March 6 in a report.
In a worst-case scenario, China could see growth of less than three per cent, while Japan, Australia and Hong Kong could “flirt with recession”, the report said.
Hong Kong, which suffered its first recession last year since 2008, is tipped to shrink further. The city, along with Singapore, Thailand, and Vietnam would be the hardest hit, with tourism – which has been battered globally – accounting for around ten per cent of growth on average.
S&P said it expected the region to grow four per cent this year from the supply and demand shocks. That compares with a 4.8 per cent estimate given in December and would be the worst performance since a contraction in 2008 caused by the global financial crisis.
“Asia-Pacific’s outlook has darkened due to the global spread of the coronavirus,” the report said, adding that “this will exert domestic supply-and-demand shocks in Japan and South Korea. It will mean weaker external demand from the US and Europe.”
China’s growth worst in three decades
The report said economies were suffering from the double-whammy of weak demand as consumers stay home for fear of catching the disease, as well as falling supplies as industries are rocked by shutdowns.
China’s economy – which was already stuttering before the crisis struck – is estimated to expand by just 4.8 per cent this year, which would be the worst in three decades. However, in the worst case, which “assumes localised reinfections as people return to work and the re-imposition of some restrictions on activity” growth could crash to just 2.9 per cent.
Still, S&P did say that economies would likely see healthy rebounds.
“A recovery is likely to be delayed until the third quarter if signs emerge by the second quarter that the virus is globally contained,” the report said.
“We assume that the coronavirus will not permanently impair the labour force, the capital stock or productivity – hence, the region’s economies should be employing as many people and producing as much output by the end of 2021 as it would have done in the absence of the virus.”