‘AsPac can ward off short-term economic impact of coronavirus’

MANILA, Philippines — Countries in Asia Pacific including the Philippines have substantial financial buffers and room for further policy easing to offset any short-term hit to economic activity from China’s coronavirus outbreak, according to US-based credit rating agency Fitch Ratings.

“Asia-Pacific countries have substantial financial buffers and room for further policy easing to offset any short-term hit to economic activity from the outbreak, but their resilience to any health crisis would ultimately depend on its scale,” Fitch said.

The debt watcher has affirmed the “BBB” rating or a notch above minimum investment grade and stable outlook on the Philippines in July last year.

Under such a scenario, the international credit rating agency expects global companies exposed to travel and tourism to be most at risk of being affected.

It said global airlines, gaming, lodging and leisure sectors are vulnerable to pandemics that influence consumer behavior.

Operational disruptions caused by idiosyncratic events – including disease outbreaks, acts of terrorism and even weather – are a perennial risk faced by these sectors.

Large-scale, unpredictable events can cause immediate and severe disruptions in global travel demand that affect revenue but are typically transitory.

The debt watcher explained financial implications ultimately depend on the severity and duration of the situation.

“If the Wuhan coronavirus outbreak is short lived, the shock should not result in any near-term erosion of credit metrics or negative rating actions for Fitch-rated corporates or sovereigns. If, however, the outbreak spreads and is prolonged, dampening consumer sentiment, effects could become more widespread,” Fitch said.

It warned the macroeconomic effects would initially be felt the most in Asia, where the virus originated, should the outbreak escalate sharply.

Service sector activity, particularly in fields associated with tourism, would be most vulnerable, which could leave economies such as Thailand, Vietnam and Singapore exposed, along with Hong Kong and Macao, both of which are already on negative outlook.

It added upward ratings momentum for Asia-Pacific sovereigns with significant tourism receipts, such as Thailand and Vietnam, where Fitch has a positive outlook on both, could also be affected depending on the severity of the outbreak.