In a recent research report Moody’s identifies which Asian countries are most vulnerable to slower global trade volumes and which stand to gain.
— Hong Kong, Singapore, Taiwan, Vietnam and Mongolia are among the most exposed in Asia Pacific to a sustained trade slowdown in China.
— But Taiwan and Vietnam also stand to benefit the most, along with Thailand and Malaysia, from trade and investment diversion away from China.
Asia Pacific: Spillovers From Slowing Trade Weigh On Growth
Moody’s Investors Service has examined 23 rated countries in Asia Pacific and identified in a just-released report, countries that benefit the most and those which are the most vulnerable to falling trade volumes globally, in part because of the ongoing and broad-based tensions between the US (Aaa stable) and China (A1 stable).
“Given the uncertain outlook for growth and trade policy, as well as generally tighter financing conditions, slower investment growth will amplify the trade slowdown, especially in Hong Kong, Singapore, Taiwan, Vietnam and Mongolia,”Christian de Guzman, a Moody’s Vice President and Senior Credit Officer.
Shifts In Production Chains Positive For A Few Sovereigns Over Time
Unsurprisingly, countries that already participate in the regional manufacturing supply chain have the greatest export similarity to China, notably Vietnam, Korea, Thailand, Taiwan, Japan (A1 stable) and Malaysia. While among the most susceptible to the direct impact of slower trade flows as described above, these countries are at the same time best positioned to benefit from positive spillovers.
“And, gains from trade and investment diversion away from China will depend on industrial structure, scalability and labor costs — potentially benefiting Taiwan, Thailand, Malaysia and Vietnam — although the reconfiguration of supply chains will occur only over time,”Christian de Guzman
Higher public spending can mitigate flagging external demand, especially in Singapore (Aaa stable), Korea (Aa2 stable) and Taiwan (Aa3 stable), because these countries’ strong fiscal positions provide scope for potentially greater support.
Countries such as Bangladesh (Ba3 stable) are also less vulnerable to a softening in Chinese demand because of their reliance on trade outside of Asia Pacific.
BOT relaxes rules to Curb Strong Baht
the Bank of Thailand (BOT) decided to relax regulations to facilitate capital outflows to help promote capital flow balance and lessen pressure on the baht.
The Thai baht has been under pressure due to imbalanced capital flows in the current environment of highly uncertain and volatile external conditions, the Ministry of Finance (MOF) and the Bank of Thailand (BOT) decided to relax regulations to facilitate capital outflows to help promote capital flow balance and lessen pressure on the baht.(more…)
Bank of Thailand cuts rate by 0.25% to 1.25 per cent
The latest cut brings the Bot’s policy rate to an historical low, which the bank maintained from April 2009 to July 2010 during the subprime global financial crisis.
On 6 November 2019, the MPC voted 5 to 2 to reduce the policy rate by 0.25 percentage point from 1.50 to 1.25 percent, effective immediately. Two members voted to maintain the policy rate at 1.50 percent.(more…)
Thailand’s loss of trade privileges with US is credit negative
The development is credit negative because Thailand’s export-oriented economy is in a difficult external environment given that a broad-based export slowdown and strong Thai baht are weakening the competitiveness of goods exporters and the country’s tourism industry.
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