As measures to contain the coronavirus and fear of contagion hit consumption and production, downside risks to our GDP growth forecast for China (A1 stable) have increased., says Moody’s Research Announcement.

For the rest of the world, the most immediate economic implications will manifest through a fall in tourist arrivals from, and weaker exports of goods to China, and transmission to and through economies integrated into the Chinese supply chain.

Our baseline assumption is that the economic effects of the outbreak will continue for a number of weeks, after which they will tail off and normal economic activity will resume. The direct impact of the outbreak on growth through multiple channels will centre on Asia Pacific (APAC) and potentially some commodity exporters globally.

By contrast, we estimate it will have a muted impact on countries in Europe and the Americas because of their more modest trade and tourism links to China.

Marked economic exposure for some, but sovereign credit profiles generally resilient

GDP growth in neighbouring Hong Kong (Aa3 stable) and Macao (Aa3 stable) is likely to be significantly lower, driven by trade and tourism.

Growth in other tourism-dependent economies in APAC, such as the Maldives (B2 negative), Cambodia (B2 stable), Thailand (Baa1 positive) and to a lesser extent Vietnam (Ba3 negative), will also soften.

More generally, GDP growth will be restrained in Taiwan (Aa3 stable) and other economies that export substantially to China. The buffers available to most sovereigns that are particularly exposed through trade and tourism are relatively strong. Under our baseline assumptions, the credit-negative implications will be minimal.

A prolonged fall in prices would hurt commodity-producing sovereigns with weak credit profiles

 Our baseline assumption is that commodity prices will not decline significantly further. However, a negative feedback loop of weak manufacturing activity and expectations of an entrenched growth slowdown in China could depress prices on a prolonged basis.

In such a scenario, commodity-reliant sovereigns with already weak credit profiles – such as Zambia (Caa2 negative), Republic of the Congo (Caa2 stable), and Mongolia (B3 stable) – would be most at risk. A downside scenario of a more prolonged coronavirus outbreak could also disrupt supply chains globally, in particular in Asia, with larger implications for growth than in our baseline. Some sovereigns could see delays in Chinese-funded projects, while market financing conditions could also tighten.

The report forms part of a series of research on the credit implications of the coronavirus outbreak
on various sectors globally, as Moody’s…

Source link : Governments most exposed to coronavirus have strong fiscal and external buffers by Boris Sullivan

On New Year’s Eve, the Chinese government announced that it had discovered 27 cases of a new coronavirus in Wuhan, the most populous city in central China.

A month later, there are now over 17,000 reported cases in 24 different countries and territories and more than 350 people are confirmed to have died.

Though the overwhelming majority of cases have appeared in China, cases are now appearing throughout Asia and further abroad. This rapid spread of a novel coronavirus (2019-nCoV), combined with the lack of a known treatment, has provoked international panic.

Memories of Severe Acute Respiratory Syndrome (SARS)

For many, this emergency brings up memories of Severe Acute Respiratory Syndrome (SARS). Over 8000 people in nearly 30 countries and territories fell ill and 774 people died before the World Health Organization (WHO) declared the outbreak ‘contained’ in July 2003.

Beyond the human toll, the SARS outbreak led to significant economic losses, challenged the authority and legitimacy of the Chinese government and fostered prejudice against Asians for spreading the disease. With the new coronavirus, news stories are comparing SARS and 2019-nCoV and claiming that the economic and political effects may be even greater.

The spread of 2019-nCoV will not stop without concerted action by national and international officials. In China, the government has allowed international experts to assist with its response, sought to counter rumours and false information and is building two new hospitals — set to be completed within two weeks — to house patients at the epicentre of the crisis.

Almost 60 million people quarantined

More problematically, it effectively quarantined almost 60 million people in 17 cities by shutting down transportation networks and restricting public gatherings. The government argues that implementing the largest ever known quarantine measures will prevent the disease from spreading.

But not all of the actions taken so far are likely to be effective. Some of the Chinese government’s actions fly in the face of best practice. While it is attempting to quash rumours about the new disease, China is also arresting people who criticise the government’s response. The increased burden on health care workers has raised stress levels, too, with nurses in Hong Kong threatening to go on…

Source link : Fighting the new coronavirus by East Asia Forum

On Wednesday, the World Health Organization said that China’s coronavirus has infected nearly 6,000 people domestically so far, with an additional 68 confirmed cases in 15 other countries.

The primary impact is on human health. However, the risk of contagion is affecting economic activity and financial markets. The immediate and most significant economic impact is in China (A1 stable) but will reverberate globally, given the importance of China in global growth as well as in global company revenue.

By sector, the coronavirus will likely have the largest negative impact on goods and services sectors within and outside of China that rely on Chinese consumers and intermediary products.

China’s annual GDP growth forecast unchanged so far, but composition could shift

In our baseline, we expect the outbreak to have a temporary impact on China’s economy and for annual GDP growth in China to remain in line with our forecast of 5.8% in 2020.

However, the composition of growth will likely shift because of a dampening of consumption in the first quarter, potentially offset by stimulus measures.

Nonetheless, there is still a high level of uncertainty around the length and intensity of the outbreak, and we will review our forecasts as conditions evolve.

Excerpt from “Moody’s Sector Comment“, 30 January 2020 issue.

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Source link : Coronavirus will hurt spending in China, with spillover to global companies by Zhong Li

The Commerce Ministry reported on Wednesday that customs-cleared exports fetched $19.15 billion in December, down by 1.28% 

For December, outbound shipments fell for the fifth straight month, but improved from a 7.39% plunge in November. Exports fell by 4.5% in October, 1.4% in September and 4% in August, respectively.

The Trade Policy and Strategy Office (TPSO) has indicated that the gross value of Thai exports last year was 246.244 billion U.S. dollars, showing a 2.65 percent decline from the previous year, due to the U.S.-China trade war and the strong Thai baht.

Apart from the global slowdown, we also have to deal with the strong baht which is too much to bear for Thai exports. But we are doing better than South Korea.

PIMCHANOK VONKORPON, DIRECTOR-GENERAL OF THE TRADE POLICY AND STRATEGY OFFICE

Exports to China decreased 3.8% to $29.1 billion. Companies are believed to be buying less parts for their Chinese production hubs, with shipments of rubber products down 15% and computers and parts down 9% according to a Nikkei report.

U.S. overtakes China as first destination

Thai exports to the U.S. increased 11.8% to $31.3 billion in 2019, while exports to China decreased 3.8% to $29.1 billion, as customers there looked for alternatives to Chinese-made products, making the U.S. Thailand’s biggest trade partner for the year over China.

The impact of the trade war on Thai exports has stabilised and begun to decline in recent months, owing to substitution effects both in the United States and China, and supply chain adjustments.

Pimchanok Vonkorpon, director-general of the Trade Policy and Strategy Office

Another highlight in December was that exports to two major trading partners, the US and China, recorded positive growth at 15.6 and 7.3% respectively. Exports to Taiwan and the Middle East also  strengthened, increasing by 16.2% and 11.4% respectively, Ms Pimchanok said. 

Looking forward, the Thai government expects trade to pick up thanks to the “phase one” trade deal signed by the U.S. and China. “We can expect a 1.5% to 2% increase in exports in 2020,” said Pimchanok Vonkorpon, director-general of the Commerce Ministry’s Trade Policy and Strategy Office.

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Source link : Thai Exports fell for fifth straight month, down 2.65% in 2019 by Boris Sullivan

Thailand’s growth slowed to an estimated 2.5 percent in 2019 from 4.1 percent in 2018, due to external and domestic factors.

The economy is projected to pick up moderately to 2.7 percent in 2020 as private consumption recovers and investment picks up due to the implementation of large public infrastructure projects.

As Thailand seeks to transition to high-income status by 2037, boosting productivity and reviving private investment will be critical, according to the World Bank’s Thailand Economic Monitor report, released today.

Global economic growth is forecast to edge up to 2.5 percent in 2020 as investment and trade gradually recover from last year’s significant weakness but downward risks persist.

Risks include a re-escalation of trade tensions and trade policy uncertainty

These risks include a re-escalation of trade tensions and trade policy uncertainty, a sharper-than-expected downturn in major economies, and financial turmoil in emerging market and developing economies.

“A continued deceleration of economic activity in large economies, China, the Euro Area, and the United States, could have adverse repercussions across the East Asia region, through weaker demand for exports and the disruptions of global value chains.” 

Birgit Hansl, World Bank Country Manager for Thailand. “

Financial investment, commodity, and confidence channels could further weaken the global economy and adversely impact Thailand’s exports.”

Declining exports and growing weaknesses in domestic demand

In 2019, declining exports and growing weaknesses in domestic demand were the key drivers of the slowdown in growth in Thailand.

Agricultural commodity exports declined by 7 percent in the first three quarters of 2019, led by sharp decreases in export volumes for major products such as rice and rubber. Manufacturing exports declined by 6 percent in the same period, with electronics exports hardest hit.

Thailand’s strong currency, which has appreciated by 8.9 percent since last year, making the baht the strongest it has been in six years, has also impacted international tourism and merchandise exports.

Accommodative monetary policies and a fiscal stimulus package

The government has responded swiftly to the growth slowdown, through accommodative monetary policies and a fiscal stimulus package to boost economic growth.

Going forward, the report recommends the governments consider policies to enhance the effectiveness of the stimulus by focusing on implementing major public investment projects, improving the efficiency of public investment management, and providing social protection coverage for vulnerable families.

The recent growth slowdown has…

Source link : Productivity is Key to Thailand’s Growth and Prosperity, says World Bank by World Bank

 The Prime Minister and the Minister of the Interior have issued statements assuring members of the public that the administration is doing its best to address the issue of air pollution.

Prime Minister and Defense Minister General Prayut Chan-o-cha expressed his concerns over the well-being of the people and instructed local provincial administrations to mitigate the problem, telling them to look after the health of their respective local residents.

Meanwhile, the Minister of the Interior advised people in affected areas to avoid engaging in prolonged outdoor activities and wear face masks when venturing outside. The agency also recommended youths, senior citizens and people suffering from respiratory illnesses seek medical attention as soon as they start exhibiting irregular respiratory symptoms.

The highest PM 2.5 level in Bangkok was recorded at Soi Ladphrao 95 by Ladphrao road in Bueng Kum district of Bangkok with 71 micrograms per cubic meter of air due to heavy morning traffic. Still air in many areas of Bangkok during this period provides favorable conditions for dust accumulation. Members of the public in affected areas should limit their outdoor activities and closely monitor the situation.

In the northern region, air quality levels today were measured from very good to starting to have health effects. The PM 2.5 level in the region today ranged from 16 to 71 micrograms per cubic meter of air. The PM 2.5 levels were recorded beyond healthy levels in Ban Tom subdistrict in Phayao, Phra Bat subdistrict in Lampang, Sob Pad subdistrict in Lampang, Ban Dong subdistrict in Lampang, Mae Mo subdistrict in Lampang, Ban Klang subdistrict in Lampoon, and Na Chak subdistrict in Phrae.

Water crisis center

Many provinces of Thailand are now facing a drought disaster, which is expected to be more severe than last year.

In response, the government has set up a special command center chaired by the Prime Minister, to handle the crisis and assist affected village.

The center will serve as a temporary cooperative center according to the Water Resources Act BE 2561 until the situation improves. The center will oversee operations, situational forecasts, management, crisis warnings, and public relations.

The government now expects the drought disaster this year to be very severe, and has…

Source link : Thailand struggles with environmental issues by Bahar Karaman

The Eastern Economic Corridor (EEC) continues to attract more investors. Last year, the EEC generated over 100 billion baht from outside investment.

To keep the momentum going, the Deputy Prime Minister, Dr. Somkid Jatusripitak, has instructed the Eastern Economic Corridor Policy Committee (EECPC) to ensure that six key infrastructure projects in the region begin this year.

The six projects encompass the high-speed train route linking Suvarnabhumi, Don Mueang and U-Tapao airports; U-tapao airport; a center to handle the maintenance, repair and overhaul of planes; the third phase of Map Ta Phut port; the third phase of Laem Chabang port and the development of Digital Park Thailand (EECd).

These projects will be implemented in line with the Smart City project in Chachoengsao province to attract new investment.

Once the projects are underway, they will benefit the grassroots economy in the three provinces of Chachoengsao, Chonburi and Rayong. The Board of Investment (BOI) has been assigned to create an incentive package to promote investment and encourage the private sector to support grassroots economic development through agriculture and tourism.

The Ministry of Finance and the Bank for Agriculture and Agricultural Cooperatives (BAAC) will work together to develop 300,000 to 400,000 Smart Farmers nationwide. Currently, Thailand has 100,000 Smart Farmers.

The government has set a target of 10 million tourists arriving at U-Tapao airport; the establishment of partnerships between small and medium-sized enterprises (SMEs) and major businesses, and reducing the number of low-income earners in the EEC from 350,000 people to zero within three years.

Speaking of the tensions between the United States and Iran, Dr. Somkid said the issue is an external factor. Even if the tensions don’t escalate, they may still affect oil prices. However, Thailand had been in similar situations before, and the government is ready to handle developments.

The Secretary-General of the EECPC, Kanit Sangsubhan, said today the government has expedited EEC development through legal measures and infrastructure projects. They will generate 300 billion baht for the economy annually and contribute to gross domestic product (GDP) growth by 1.5 to 2% each year.

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Source link : Thailand must start six EEC infrastructure projects this year by National News Bureau of Thailand