KUALA LUMPUR: At a time when China is observing decelerating economic growth, it has another stumbling block thrown onto its path - the coronavirus epidemic.
And this does not spell good news for countries in the region, especially those that are heavily reliant on China.
A lot of it will depend on how quickly the virus outbreak gets under control, according to the World Bank.
The World Bank vice-president for East Asia and the Pacific Victoria Kwakwa said the next couple of weeks will be important in determining the magnitude of the impact.
“Certainly the Chinese economy will be impacted.
“This happened at a time where there are a lot of expenditures and economic activities just because people are celebrating (Chinese New Year) and a lot of that did not happen.
“We’re beginning to do some analysis.
“We don’t have clear numbers yet but I think we could see not insignificant impacts, particularly if the next two weeks it becomes clearer whether this is something that is now contained and we’re going to see a slowdown in the rate of progression of the disease.
“If not, we could be in serious trouble.
“Globally, China is very important and it is even more important for the region, ” she told StarBiz.
Kwakwa stressed that it is not just the impact of the virus for the other countries, which might not be much since most countries do not have a lot of cases, but it is the indirect effect on the impact on China.
It would be the spillover effect to the economies that are highly linked to the Chinese economy and the World Bank has begun its studies on this, including the impact on China.
While there are the various potential lines of adverse impacts, Kwakwa also pointed out that there are certain lines of activities to look into which might get a boost, such as the medical sector, the production of medical equipment in particular.
These areas could see some pickup, which could then affect trade.
Generally, Kwakwa said countries also have to be in a stronger state of economic management to be able to withstand shocks, whatever the shocks were, which could be lower demand and slowdown in China so that in a negative scenario, they are able to bounce back a little faster.
And as far as Malaysia is concerned, Kwakwa said the World Bank was quite impressed with the steps undertaken by the government on the medical front and also in terms of the impact on the economy in dealing with the coronavirus outbreak,
“The finance minister talked about the tourism sector being impacted and what could be done and some stimulus measures that we’re originally considering and in case the trade war continued and deepen.
“The measures haven’t been rolled out and perhaps, do not need to be rolled out on the account of the trade issues but if needed, it could be rolled out to support the relevant part of the economies because of the crisis, ” she said.
Kwakwa was in Malaysia recently to ink a mutual agreement with the Government to extend the work of the World Bank Group’s Global Hub in Kuala Lumpur for an additional five-year period from 2021 to 2025.
She also had a bilateral meeting with Prime Minister Tun Dr Mahathir Mohamad.
“I think there’s excitement about the second phase, about what we can do together.
“The finance minister was pleased about the partnership that we launched.
“We talked about some of the work we will be doing and in particular, a report on a high-income economy as Malaysia is trying to get to the home stretch of becoming one.”