Wednesday 1 April 2020

Sovereigns remain ‘resilient to coronavirus impact’

LONDON, February 11, 2020

While the coronavirus outbreak poses increasing risks to the growth outlook for a number of countries, the credit profiles of the most-exposed sovereigns remain resilient, Moody’s Investors Service said in a new research report.

 Key points:

•    Moody’s expects a marked weakening in Chinese demand as consumers are unable or unwilling to spend, and companies operate below normal capacity with many factories facing temporary shutdowns. Risks to Moody’s GDP growth forecast for China have increased

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

•    Growth in other tourism-dependent economies in APAC, such as the Maldives, Cambodia and Thailand, will also soften.

•    The impact will be muted for countries in Europe and the Americas because of their more modest trade and tourism links.

•    If the outbreak is more prolonged, disruption to supply chains and a possible extended fall in commodity prices could cause significant second-round economic effects.

•    In particular, it would hurt commodity-producers with already weak credit profiles, such as Zambia, Republic of the Congo and Mongolia.

•    This would hold true for oil exporters as well – if oil prices remain depressed, some hydrocarbon exporters such as Republic of Congo in Africa, Oman in the Gulf, Malaysia in APAC) will see a rundown in existing buffers, particularly public finances, which hinge on oil prices remaining above specific levels.

 “The most immediate economic implications from the coronavirus outbreak will manifest through a fall in tourist arrivals from, and weaker exports of goods to, China and other economies integrated into the Chinese supply chain,” said Anushka Shah, a Moody’s vice president – senior analyst and author of the report. – TradeArabia News Service


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