The regional macroeconomic surveillance organization Asean+3 Macroeconomic and Research Office (Amro) sees the economic impact of the COVID-19 outbreak in China to be felt by most of its neighbors, including the Philippines, and slow growth across the region.
In a Feb. 12 report, Amro said “a disease outbreak in China” was seen resulting in a “marked slowdown in its growth” and “have widespread spillovers to the region and the rest of the world.”
Asean+3 includes China, Japan, South Korea and the 10 Southeast Asian countries belonging to the regional grouping.
Based on Amro’s estimates, China’s gross domestic product could lose as much as 0.5 percent “taking into account the supporting measures by the government” to stop COVID-19.
For the Asean plus three grouping, a deduction of 0.2 percent in GDP is expected, said Amro.
“The main spillover channels to the region would be through a sharp drop in Chinese outbound travel and tourism,” said Amro’s report.
Fear of infection would also lead to a decline in regional travel and tourism, it said. A fall in Chinese imports was likely because of disruption in production.
In the Philippines, Amro said the tourism sector contributes at least 20 percent of GDP.
“Regional economies with large tourism sectors and a high share of Chinese visitors are expected to be particularly hard hit,” said Amro.
Travel bans from and into China has “almost immediately affected” tourism, Amro said.
It said most affected were Cambodia, Thailand and Hong Kong. Vietnam was hit “to a lesser extent,” the Amro report said.
“The sharp drop in tourism during the SARS outbreak in 2003 represents a relevant benchmark,” said the report.
During the SARS epidemic, tourism fell across the region—in China, Japan, Korea, Malaysia, Philippines, Singapore and Indonesia—between 50 to 90 percent between May and June 2003. Tourism, however, rebounded in 2004.
If the COVID-19 epidemic would be shortlived, Amro said “a similar rebound could somehow mitigate the initial, sharp pullback.”
But Asean plus 3 economies could be hit by a double whammy because a “direct shock to China’s growth has a much larger impact” and “any increase in global uncertainty also dampens economic growth.”
It said if Chinese economic activity declined by 1 percent, Hong Kong and Singapore would be hardest hit. The hit on Thailand’s growth could “almost be as large as China’s.”
“The negative effects on Malaysia, Japan, Korea and the Philippines are of relatively similar magnitude, while Indonesia appears to be the least exposed,” according to Amro.