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Coronavirus dents optimism with China’s growth forecast down to 5.2%

If the outbreak persists, the domestic and international supply chain disruptions are likely to become significant, amplifying the shock to the global economy.

Boris Sullivan

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Moody’s has published a report titled “Global Macro Outlook 2020-21 (February 2020 Update): Coronavirus clouds growth outlook just as the economy showed signs of stabilization“, and has revised its global growth forecasts down by two-tenths of a percentage point, now expecting G-20 economies to collectively grow at an annual rate of 2.4% in 2020.

Highlights

  • Downside risks to the global economy would be severe if the coronavirus grows to pandemic proportions
  • Fears of coronavirus contagion will negatively affect commerce in China
  • G-20 economies to collectively grow at an annual rate of 2.4% in 2020 (down 0.2% from previous assessment).
  • Moddy’s has also revised downward the GDP growth forecasts for China to 5.2% in 2020, and maintains expectation of 5.7% growth in 2021.
  • China’s GDP growth forecasts reduced to 5.2% in 2020

The coronavirus epidemic creates new risks to the prospects of an incipient stabilization of global
growth this year resulting from a truce in the US-China trade war and emerging signs of a pickup in the industrial sector.

Moody’s Investors Service has revised its global growth forecasts down by two-
tenths of a percentage point, now expecting G-20 economies to collectively grow at an annual rate of 2.4% in 2020.

China’s GDP growth forecasts reduced to 5.2% in 2020

The rating agency has also revised downward the GDP growth forecasts for China to 5.2% in 2020, and maintains expectation of 5.7% growth in 2021.

“The outbreak will first and foremost hurt China’s economy by lowering discretionary consumer
spending on transportation, retail, tourism and entertainment.

There is already evidence – albeit anecdotal – that supply chains are being disrupted, including outside China.

Furthermore, extended lockdowns in China would have a global impact given the country’s importance and interconnectedness in the global economy,” says Moody’s Vice President Madhavi Bokil.

“With the virus continuing to spread within China and to other parts of the world, it is still too early to make a final assessment of the impact on China and the global economy.”

Moody’s Vice President Madhavi Bokil

The toll on the global economy would be severe if the rate of infections does not abate and the death toll continues to rise.

If the outbreak persists, the domestic and international supply chain disruptions are likely to become significant, amplifying the shock to the global economy.

Global companies operating in the affected areas would face output losses as a result of the extended closures of businesses and factories.

Companies that operate outside China but depend on inputs from the affected area would face temporary production delays.

Reduced Chinese demand for the Asia’s exports and supply chain disruptions represent the two
most direct transmission channels for slowing economic growth, although services trade adds a third channel.

As such, goods and commodity exporters are most exposed to a protracted fall in Chinese demand, while tourism hubs that rely on Chinese visitors will also be vulnerable.

Reduced growth forecasts for Korea, Japan and Australia

In addition, the negative spillover would also affect countries, sectors, and companies that either derive revenue from or produce in China, or rely on Chinese demand.

Apart from China, Moody’s has also reduced the growth forecasts of Korea, Japan and Australia on account of the coronavirus outbreak.

The negative shock to China’s economy has the potential to harm the stabilization and recovery of other economies through trade and tourism channels.

Growth forecasts for advanced economies are mostly unchanged. Among emerging market countries, Moody’s has materially revised downward the growth forecasts for India, Mexico and South Africa, reflecting domestic challenges rather than external factors.

Economics

Thai fruit exports to FTA markets up 107 percent

China, Malaysia, Singapore, Indonesia, the Philippines, Hong Kong, Australia and Chile are top importers of Thai fruits, especially fresh durian, mangosteen, longan and mango. Thai exporters are able to benefit from FTA privileges.

National News Bureau of Thailand

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BANGKOK (NNT) – Thailand’s fruit exports continue to increase, despite the sluggish global economy caused by the COVID-19 pandemic, with key trade partners being countries that have free trade agreements (FTAs) with the kingdom.

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Economics

The Future of Asia: greener but with a public and private debt hangover

The COVID-19 pandemic has been a perfect storm, destroying jobs, worsening poverty and inequality, and creating a public and private debt problem—especially for countries and firms already in fragile financial health beforehand

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The Sydney Opera resumed live performances and the city of Melbourne recently hosted the Australian Open tennis tournament with fans (mostly) in attendance.

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Economics

50:50 campaign may not get immediate extension

National News Bureau of Thailand

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BANGKOK (NNT) – The government’s 50:50 co-pay campaign expiring on 31st March may not be getting an immediate campaign extension. The Minister of Finance says campaign evaluation is needed to improve future campaigns.

The Minister of Finance Arkhom Termpittayapaisith today announced the government may not be able to reach a conclusion on the extension of the 50:50 co-pay campaign in time for the current 31st March campaign end date, as evaluations are needed to better improve the campaign.

Originally introduced last year, the 50:50 campaign is a financial aid campaign for people impacted by the COVID-19 pandemic, in which the government subsidizes up to half the price of purchases at participating stores, with a daily cap on the subsidy amount of 150 baht, and a 3,500 baht per person subsidy limit over the entire campaign.

The campaign has already been extended once, with the current end date set for 31st March.

The Finance Minister said that payout campaigns for the general public are still valid in this period, allowing time for the 50:50 campaign to be assessed, and to address reports of fraud at some participating stores.

The Fiscal Police Office Director General and the Ministry of Finance Spokesperson Kulaya Tantitemit, said today that a bigger quota could be offered in Phase 3 of the 50:50 campaign beyond the 15 million people enrolled in the first two phases, while existing participants will need to confirm their identity if they want to participate in Phase 3, without the need to fill out the registration form.

Mrs Kulaya said the campaign will still be funded by emergency loan credit allocated for pandemic compensation, which still has about 200 billion baht available as of today.

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