Fitch Ratings: Coronavirus set to dampen China’s economic growth

By Sarkaritel February 8, 2020 12:22

New Delhi [India], February 8 – Global consultancy Fitch Ratings says the ongoing coronavirus outbreak will dampen economic growth in China this year. However, the scale of the impact remains uncertain and will depend on the duration and intensity of the health crisis.

If the government was to launch a large-scale stimulus to offset the effects of the epidemic, Fitch said, it can have an adverse effect on other policy goals such as reducing financial risk.

“However, we believe that the government is only likely to do so if the economic impact of the virus proves to be substantially larger than the SARS outbreak in 2003,” it added.

Huge uncertainties remain over the impact of the coronavirus on China’s economy. “We believe it is still too early to make definitive adjustments to our GDP forecasts at this stage and instead have examined some illustrative scenarios.”

Services account for a larger share of China’s GDP today than they did in 2003 (54 per cent compared with 42 per cent). The much harsher official ‘lock-down’ restrictions in place will also imply that if the 2019-novel coronavirus (nCoV) epidemic were to last three months, its economic impact will very likely be more severe than SARS.

The tough official restrictions on economic activity can, however, result in a more rapid containment than SARS.

“A shock to services and industrial output similar in scale to that from SARS will cut growth in 1Q20 to around 4 per cent year-on-year, according to our calculations, compared with a forecast of 5.9 per cent in our most recent update and 6 per cent in 4Q19,” said Fitch.

“Even allowing for some pick-up in growth in late 2020, this could see annual growth in 2020 fall to around 5.5 per cent compared with our latest annual forecast of 5.9 per cent.”

Meanwhile, the Asian Development Bank (ADB) has approved two million dollars in new funding to support efforts to combat the spread of nCoV.

The funds will supplement ongoing regional technical assistance and strengthen response capacity in Cambodia, China, Laos, Myanmar, Thailand, and Vietnam.

The assistance will fund the development of recommendations for improved outbreak investigation and surveillance, including in rural areas, and the strengthening of health systems’ resilience and capacity for epidemic response.

“ADB has a track record of providing rapid and targeted support to our members in emergency situations,” said ADB President Masatsugu Asakawa. “We stand ready to provide further assistance as required.”

By Sarkaritel February 8, 2020 12:22