Friday February 28, 2020

Here’s Why Coronavirus May Have Severe Impact on Asia’s Economy

This time around Chinese tourism matters even more to Southeast Asia

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Coronavirus
The Coronavirus outbreak, which has so far caused 41 deaths in China, and caused the country to quarantine 16 cities, is causing comparisons to the 2003 spread of severe acute respiratory syndrome, or SARS, which decreased the value of the global economy by $40 billion. VOA

Southeast Asia’s proximity to China and dependence on that nation for a major share of its economy is raising concerns that the coronavirus outbreak  that started there will not only have health impacts but harm the region’s economies.

The outbreak, which has so far caused 41 deaths in China, and caused the country to quarantine 16 cities, is causing comparisons to the 2003 spread of severe acute respiratory syndrome, or SARS, which decreased the value of the global economy by $40 billion.

“Now that the Wuhan coronavirus has been found to be able to be transmitted from human to human, the economic consequences could be extremely concerning for the Asia-Pacific region,” Rajiv Biswas, IHS Markit Asia Pacific chief economist, said.

Sectors of the economy that are particularly vulnerable to a SARS-like virus epidemic that can be spread by human-to-human transmission are retail stores, restaurants, conferences, sporting events, tourism and commercial aviation,” he said.

Observers agree that tourism could be one of the hardest-hit industries, in part because of the millions of Chinese who usually travel now, during the Lunar New Year, and in part because China has grown so much in the last two decades that many neighboring nations depend on it for tourism.

That is only one of the economic differences between China today and the China of the SARS virus in 2003.

Coronavirus
The recent coronavirus outbreak originating from China to other countries including Singapore may impart some uncertainty to near-term business and consumer sentiments. VOA

China has since then become a member of the World Trade Organization and the second-biggest economy in the world. Its supply chain has become more integrated with the rest of the world than it has ever been, and it has become the biggest trading partner for many countries in the region.

The 2003 virus decreased China’s economic growth rate, but its effect was the same for Malaysia, Singapore, and Vietnam, Biswas said.

This time around Chinese tourism matters even more to Southeast Asia.

After Hong Kong, nations for which Chinese visitors’ spending accounts for the biggest share of gross domestic product are, from most to least, Cambodia, Thailand, Singapore, Vietnam, and Malaysia, according to statistics released by Capital Economics, a London-based research company, Friday. In many of these nations, businesses catering to tourists display signs in Chinese, accept China’s yuan currency, and use that country’s WeChat for mobile payments.

Major tourism events in the region add to the threat that the virus and its economic impact will spread, such as the Tokyo Summer Olympics, Biswas said. Vietnam will also host the Vietnam Grand Prix Formula One race this year, while Malaysia will host the Asia-Pacific Economic Cooperation forum.

Singapore is an island nation that depends heavily on foreign trade, including to facilitate trade and investment in China. Selena Ling, head of treasury research and strategy at Singapore’s OCBC Bank, said Friday she was expecting Singapore’s economy to stage a modest recovery from 2019, but that may change.

Coronavirus
Southeast Asia’s proximity to China and dependence on that nation for a major share of its economy is raising concerns that the coronavirus outbreak  that started there will not only have health impacts but harm the region’s economies. VOA

She said “the recent coronavirus outbreak originating from China to other countries including Singapore may impart some uncertainty to near-term business and consumer sentiments.”

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That could mean slower growth in the first quarter of 2020, she said. (VOA)

 

 

Next Story

“Flexible Supply Chains Are The Key To Fight Unpredictable Situations Like Coronavirus Outbreak”, Says Top HP Executive

The report said that to tackle such a situation in the future, first step is to develop visibility to your entire supply chain -- primary, secondary, and even tertiary players and steps

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Coronavirus
A global recession is likely if coronavirus becomes a pandemic, and the odds of that are uncomfortably high and rising with infections surging in Italy and Korea, Moody's Analytics said this week. Wikimedia Commons

Although the coronavirus outbreak has slowed down the global supply-chain for industries across the spectrum, the need of the hour is to not only have a diverse portfolio of products but also a diverse portfolio of factories so that such unpredictable situations can be tackled in an efficient way in the future, a top HP Inc executive said on Thursday.

A global recession is likely if coronavirus becomes a pandemic, and the odds of that are uncomfortably high and rising with infections surging in Italy and Korea, Moody’s Analytics said this week.

“We at HP Inc have a good plan to deal with the current situation which is very dynamic. That’s why it is important to have different portfolios. If you have a portfolio of products, you must also have a portfolio of factories. We are not dependent on one product and one factory,” Vinay Awasthi, Managing Director, HP Inc., India, Bangladesh and Sri Lanka, told IANS.

According to him, traditional supply chain models will slowly pave the way for more flexible mechanisms so that inventories remain at their optimum level. “I think adjustments will happen to the global supply chains. The adjustments are already happening because of the global trade war between US and China. In the future, it’s not just going to be one factory that will create one type of product and will supply all over the world,” Awasthi emphasised.

Global management consulting firm Kearney, in its report titled “Coronavirus and the impact on global supply chains,” said last week that the coronavirus outbreak and its impact on the economy has ringed the bell to immediately rethink existing supply chain scenario as established strategies only work when they are not disrupted.

The report said that to tackle such a situation in the future, first step is to develop visibility to your entire supply chain — primary, secondary, and even tertiary players and steps.

HP
Although the coronavirus outbreak has slowed down the global supply-chain for industries across the spectrum, the need of the hour is to not only have a diverse portfolio of products but also a diverse portfolio of factories so that such unpredictable situations can be tackled in an efficient way in the future, a top HP Inc executive. Wikimedia Commons

“Next, recognise that events like the coronavirus outbreak are going to happen again and again – and determine what plans work best to mitigate the damage,” the report added.

According to Awasthi, because of the coronavirus situation, people are willing to just advance the piece on flexible supply-chain delivery models.

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“We have factories in China but we also have factories at multiple places elsewhere so we are ramping up production at those factories. Going flexible is complex as every country has different tariff structure but that is the name of the game and the future,” he added. (IANS)