KUALA LUMPUR: Economic growth in the Asia-Pacific in 2020 will more than halve to less than 3% as the global economy enters a recession, says S&P Global Ratings.
In an article entitled "Asia Pacific recession guaranteed" published on Wednesday, the ratings agency said the first-quarter shock in China, shutdowns in the US and Europe and local virus transmission will trigger a deep recession across the region.
S&P defines a recession as two quarters of well below-trend growth sufficient to trigger rising unemployment.
"Our estimate of permanent income losses is likely to at least double to more than US$400bil.
"For credit markets, a key question is how these losses are distributed across sovereigns, firms, banks, and households," said Shaun Roache, the chief Asia-Pacific economist at S&P Global Ratings.
February data for China has confirmed a huge shock to activity in the first quarter.
Roache noted that investment accounts, which account for about 45% of China's economy, has taken a big hit early in the year.
Fixed asset investment in January and February plunged almost 25% from a year ago, while industrial production and retails sales fell 14% and 21% respectively in the same period.
According to Roache, the numbers are unprecedented, confirming a hard hit to China's growth and indicates that authorities are not smoothing the data.
He added that people flows from the US and Europe will be decimated for at least two quarters, adding more pressure on the tourism industry.
Meanwhile, the global policy response such as the Federal Reserve's policy-rate cut and the Bank of Japan's scale-up asset purchases will only cushion but not quickly reverse these shocks.
Local measures aiming to support vulnerable sectors and workers may help but their effect will wane the longer the crisis lasts, said Roache.
In an article entitled "Asia Pacific recession guaranteed" published on Wednesday, the ratings agency said the first-quarter shock in China, shutdowns in the US and Europe and local virus transmission will trigger a deep recession across the region.
S&P defines a recession as two quarters of well below-trend growth sufficient to trigger rising unemployment.
"Our estimate of permanent income losses is likely to at least double to more than US$400bil.
"For credit markets, a key question is how these losses are distributed across sovereigns, firms, banks, and households," said Shaun Roache, the chief Asia-Pacific economist at S&P Global Ratings.
February data for China has confirmed a huge shock to activity in the first quarter.
Roache noted that investment accounts, which account for about 45% of China's economy, has taken a big hit early in the year.
Fixed asset investment in January and February plunged almost 25% from a year ago, while industrial production and retails sales fell 14% and 21% respectively in the same period.
According to Roache, the numbers are unprecedented, confirming a hard hit to China's growth and indicates that authorities are not smoothing the data.
He added that people flows from the US and Europe will be decimated for at least two quarters, adding more pressure on the tourism industry.
Meanwhile, the global policy response such as the Federal Reserve's policy-rate cut and the Bank of Japan's scale-up asset purchases will only cushion but not quickly reverse these shocks.
Local measures aiming to support vulnerable sectors and workers may help but their effect will wane the longer the crisis lasts, said Roache.
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