Southeast Asia's proximity to China and dependence on that nation for a major share of its economy is raising concerns that the coronavirus outbreak that started there will not only have health impacts but harm the region's economies.
The outbreak, which has so far caused 41 deaths in China, and caused the country to quarantine 16 cities, is causing comparisons to the 2003 spread of severe acute respiratory syndrome, or SARS, which decreased the value of the global economy by $40 billion.“
Now that the Wuhan coronavirus has been found to be able to be transmitted from human to human, the economic consequences could be extremely concerning for the Asia-Pacific region,” Rajiv Biswas, IHS Markit Asia Pacific chief economist, said.“
Sectors of the economy that are particularly vulnerable to a SARS-like virus epidemic that can be spread by human-to-human transmission are retail stores, restaurants, conferences, sporting events, tourism and commercial aviation,” he said.
Observers agree that tourism could be one of the hardest-hit industries, in part because of the millions of Chinese who usually travel now, during the Lunar New Year, and in part because China has grown so much in the last two decades that many neighboring nations depend on it for tourism.
That is only one of the economic differences between China today and the China of the SARS virus in 2003.
China has since then become a member of the World Trade Organization and the second-biggest economy in the world. Its supply chain has become more integrated with the rest of the world than it has ever been, and it has become the biggest trading partner for many countries in the region.
The 2003 virus decreased China’s economic growth rate, but its effect was the same for Malaysia, Singapore, and Vietnam, Biswas said.
This time around Chinese tourism matters even more to Southeast Asia.
After Hong Kong, nations for which Chinese visitors' spending accounts for the biggest share of gross domestic product are, from most to least, Cambodia, Thailand, Singapore, Vietnam, and Malaysia, according to statistics released by Capital Economics, a London-based research company, Friday. In many of these nations, businesses catering to tourists display signs in Chinese, accept China's yuan currency, and use that country’s WeChat for mobile payments.
Major tourism events in the region add to the threat that the virus and its economic impact will spread, such as the Tokyo Summer Olympics, Biswas said. Vietnam will also host the Vietnam Grand Prix Formula One race this year, while Malaysia will host the Asia-Pacific Economic Cooperation forum.
Singapore is an island nation that depends heavily on foreign trade, including to facilitate trade and investment in China. Selena Ling, head of treasury research and strategy at Singapore's OCBC Bank, said Friday she was expecting Singapore’s economy to stage a modest recovery from 2019, but that may change.
She said “the recent coronavirus outbreak originating from China to other countries including Singapore may impart some uncertainty to near-term business and consumer sentiments.”
That could mean slower growth in the first quarter of 2020, she said.