As the world continues to grapple with the coronavirus pandemic, China will unlikely have a V-shape bounce back, constrained by weak domestic and overseas demand as well as disrupted supply chains in Europe and the US, says Atradius, a world leader in credit insurance, surety and debt collection. 

 

Whilst the country may be able to issue more measures to stimulate the economy, it will further jeopardise its financial position with total debt three times the size of its economy prior to the coronavirus outbreak.

 

Recession appears inevitable for export-reliant Singapore, South Korea and Taiwan which have all been adversely impacted by both the US-China trade war as well as the economic fall out of the pandemic. 

 

GDP is expected to contract 5 per cent and 1 per cent in Singapore and South Korea respectively. Among these three Asian Tigers, Taiwan and Singapore may turn out to be the most resilient markets, underpinned by their strong macroeconomic fundamentals.

 

The coronavirus outbreak has severely hit the Chinese economy in Q1 of 2020, immediately impacting retail and wholesale, travel, leisure, catering, real estate, transportation, and shipping. Cash flow of many businesses has come under pressure as sales sharply deteriorated while salary, rental and interest payments have continued. 

 

Mainly impacted are those private-owned business that already prior to the outbreak recorded limited cash flow. Since large manufacturers across the country stopped operations in early 2020, this has caused significant disruptions to supply chains in China and elsewhere.

 

It is expected that business insolvencies will increase sharply in 2020. Mainly affected are small and medium-sized private businesses, as many of them - even those active in better-performing industries - often suffer from limited financing facilities.

 

In Singapore the global coronavirus pandemic has led to a severe contraction in economic activity since the beginning of 2020. Exports are affected by supply chain disruptions and deteriorating external demand, and forecast to contract sharply by more than 10 per cent this year, mainly due to a major slump in H1 of 2020. 

 

Industrial production is expected to contract by more than 5 per cent in 2020, due to globally widespread lockdowns. The spread of coronavirus, subsequent government measures to contain the outbreak, and the standstill of tourism continue to hit domestic demand. A further spread of coronavirus cases in Singapore itself remains a downside risk.

 

While government measures to support businesses will have a positive effect, business insolvencies are expected to increase sharply in 2020. Mainly affected will the services sector (especially tourism-related businesses, accommodation and food services), consumer durables retail and construction. Service producing industries contracted by more than 15 per cent in Q1 of 2020 compared to the previous quarter.

 

South Korea is the world's leading producer of displays and memory semiconductors and the second largest shipbuilder. Exports account for about 50 per cent of GDP (mainly semiconductors and other electronic goods, cars and chemical products).

 

In South Korea In H1 of 2020 the economy is facing a technical recession due to the impact of the coronavirus epidemic, which has disrupted regional supply chains and hit global economic growth. Delayed shipments of parts from China have hurt the Korean automotive and ICT sectors, with businesses operating below capacity. Ongoing deterioration of global demand and supply chain disruption have a major negative effect on investment and exports, expected to contract in 2020. 

 

The slump in domestic demand has a severe impact on the credit risk situation and business performance of consumer durables, retail, services, and transport sectors. At the same time, construction businesses and related industries like steel suffer from the continued subdued performance of the residential construction segment (due to measures to rein in housing prices). 

 

A further deterioration of external demand could weigh on company profits of businesses in export-dependent sectors. Currently business insolvencies are expected to increase sharply in 2020.

 

Taiwan´s economy is mainly export-oriented (focusing on electronics and computer equipment, basic metals and plastics), with export of goods and services accounting for more than 70 per cent of GDP. Electronics/ICT exports account for about 33 per cent of total exports. Taiwan is highly integrated into global supply chains, and mainland China (including Hong Kong) accounts for about 40 per cent and 20 per cent of Taiwanese exports and imports respectively.

 

In early 2020 the lockdowns of several Chinese cities hampered the flow of goods and services to and from Taiwan, leading to delays in downstream production and shortage of upstream raw materials supply, especially in the electronics/ICT sector. 

 

Ongoing international supply chain disruptions and sharply decreasing global demand due to the coronavirus pandemic will affect Taiwanese exports, expected to contract by more than 6 per cent in 2020. Subdued business investment and slowing production weigh on fixed investment growth.

 

The credit risk situation and business performance of the electronics/ICT, consumer durables retail, and services (hospitality, catering, tourism) sectors has deteriorated due to the global and domestic economic downturn. A further deterioration of external demand could weigh on company profits of businesses in export-dependent sectors, mainly electronics/ICT. -- Tradearabia News Service