Singapore, Feb 19 (IANS) The coronavirus outbreak has added another dent to Asia’s growth prospects which are already under pressure, Moody’s Investors Service said in a report on Wednesday.
“The outbreak of the coronavirus has added a further dent to growth prospects at a time when economic growth trajectories throughout the region were already declining,” says Deborah Tan, a Moody’s Assistant Vice President and Analyst.
Moody’s Investors Service says in a new report that credit conditions in Asia will turn negative in 2020, in tandem with a slowdown in growth momentum, continued trade policy uncertainty and simmering political disputes.
Although several near-term pressures, such as the US-China trade dispute, have contributed to the downshift in Asia’s growth trajectory, the slowdown could turn out to be more than just a temporary blip, whereby the underlying causes are likely to be structural rather than cyclical.
These include China’s steadily decelerating growth and the fact that it is a major source of export demand for many Asian markets; growing demographic challenges in places like Thailand and Korea, a less stable geopolitical environment and the increasing threat to multilateral global trade relations.
The report said that the the likelihood of risks crystallising in Asia has risen. A slowdown in Asian growth will constrain policy choices and limit the region’s ability to respond to negative shocks.
“Lower growth could make it more difficult for governments in the region to defuse social tensions, raising political risk and reducing policy effectiveness,” adds Tan.
If Asia’s slowdown does turn out to be due to more than just temporary factors, investors might recalibrate their demand for assets from the region, possibly triggered by unexpected shocks, and funding costs for issuers could rise in weaker economies.
At the sovereign level, weaker growth prospects will hinder revenue generation and shock absorption capacity. The weaker growth outlook could increase refinancing risks for corporates and pressure asset quality at banks in the event that repayment capacities deteriorate.