Major debt watcher S&P Global Ratings on Friday said the Philippines is among the economies in the Asia-Pacific region that could be less affected by the coronavirus disease because of its minimal exposure to China and global supply chains.
But the Asian Development Bank gave a contrasting assessment. It said in a statement the coronavirus (COVID-19) outbreak would have a significant impact on developing Asian economies through numerous channels, including sharp declines in domestic demand, lower tourism and business travel, trade and production linkages, supply disruptions and health effects.
S&P Asia-Pacific chief economist Shaun Roache, in a report titled “COVID-19 Now Threatens More Damage to Asia-Pacific,” cited Indonesia, Malaysia and India along with the Philippines as having the potential to weather the economic impact of the dreaded disease that has already claimed the lives of more than 3,000 individuals globally.
“Asia’s emerging markets such as Indonesia, Malaysia, the Philippines, and India appear somewhat insulated, with less exposure to China and global supply chains,” Roache said.
But he warned the outlook could get worse very quickly for two reasons.
“If low reported cases are due, in part, to minimal testing, then viral spread is still possible, and could overwhelm weak healthcare infrastructure. Financial conditions could also tighten quickly,” Roache said.
“If investors ask for a much higher risk premium for emerging market assets, policymakers will have much less space to cut interest rates and boost public spending,” Roache said. This could add to downward pressures on growth, he said.
He said growth across Asia-Pacific will slow to 4.0 percent in 2020, the lowest since the global financial crisis, due to the coronavirus outbreak. He said a U-shaped recovery should start later in 2020 but by then overall economic damage is likely to reach $211 billion.
“Household spending in Japan and Korea are set to weaken further and slower growth in the U.S. and Europe will add to external headwinds,” he said.
Roache expects China to grow at just 4.8 percent in 2020 before rebounding strongly by 6.6 percent in 2021.
Roache said the hardest-hit economies remained Hong Kong, Singapore and Thailand where people flows and supply chain channels were large. He said Australia was also quite vulnerable, with growth in 2020 expected to touch 1.2 percent, well below trend.
S&P currently rates the Philippines BBB+ or investment grade with a positive outlook.
The ADB,meanwhile, said the magnitude of the economic losses would depend on how the outbreak evolved. Its range of scenarios in the analysis suggested a global impact in the range of $77 billion to $347 billion, or 0.1 percent to 0.4 percent of global gross domestic product.
In a moderate scenario, where precautionary behaviors and restrictions such as travel bans start easing three months after the outbreak intensified and restrictions were imposed in late January, global losses could reach $156 billion, or 0.2 percent of global GDP. China would account for $103 billion of those losses—or 0.8 percent of its GDP. The rest of developing Asia would lose $22 billion, or 0.2 percent of its GDP.
