Moody’s sees minimal impact of China virus outbreak on Bangladesh growth

Staff Correspondent | Published: 22:11, Feb 18,2020 | Updated: 23:09, Feb 18,2020


Global rating agency Moody’s Investors Service on Tuesday said that the impact of China’s economic slowdown due to the coronavirus outbreak on Bangladesh economic growth would be minimal.

But, it warned that the supply chain disruption due to virus outbreak would have a significant repercussion for intra-regional trade in Asia Pacific including Bangladesh.

Moody’s in its latest report titled ‘Sovereigns—Asia Pacific: regional growth update following coronavirus outbreak’ retained the gross domestic product growth projection for Bangladesh at 7.8 per cent for the current fiscal year 2019-2020.

It showed that Bangladesh’s economic growth would decline by very insignificantly, less than 0.1 percentage points, if the GDP growth of China fell by 1 percentage points due to the coronavirus outbreak.

The main reason for insignificant impact on Bangladesh is lower exports from the country to China.

Hong Kong would face the highest impact as its economy would shrink by more than 1.6 percentage points.

Taiwan, Singapore and Vietnam economy will also face a significant negative impact, said the report.

Moody’s showed that supply chain disruption would have significant repercussions for intra-regional trade as Bangladesh imports more than 30 per cent of its goods from China.

Bangladeshi businesses, including readymade garment exporters who bring raw materials from China for producing goods for export market, have been expressing their concern about getting their raw materials in time due to the outbreak.

Import from China has already witnessed a significant drop in recent days following the outbreak.

Some businesses are also looking for alternative markets for sourcing raw materials fearing the prolonged outbreak would affect their export.

Chinese ambassador to Bangladesh Li Jiming, however, in the last few days assured the business community several times that his country would overcome the situation and the disruption was temporary.

The Moody’s report said that the outbreak would cause disruption in regional economic activity in the first quarter and growth across countries in Asia Pacific would slow to varying degrees, dependent on  economic exposure to China.

Prolonged outbreak would cause significant second-round effects, including severe supply chain disruption, it said.

‘We assume that the economic impact of the coronavirus outbreak will be largely limited to Q1 but if the outbreak grew to pandemic proportions and lasted several months into the year, downside risks to the global economy would be more severe and amplified beyond China through a number of different channels,’ it said.

The report lowered growth forecast for China to 5.2 per cent for FY2020, reflecting a severe but short-lived economic impact.

Regional impact would be felt through trade and tourism, and for some sectors through supply-chain disruptions, it added.

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