Virus threatens financial stability across south-east Asia
Emma ConnorsSouth-east Asia correspondent
Feb 3, 2020 — 6.05pm
Kuala Lumpur | South-east Asian nations are scrambling to offset the impact of the coronavirus as the health crisis begins to threaten financial stability in the region.
The Singaporean government has unveiled a stimulus package, Indonesia has moved aggressively to prop up its currency after spooked investors sold off government bonds, and in Thailand, the central bank is expected to cut rates after the government trimmed its growth forecast for the tourism-dependent economy.
Penang tourism ventures are among those hurting as Chinese tourists stay home. supplied
Across the region, the travel sector faces a massive drop in demand due to travel bans in and out of China. The Malaysian tourism industry expected 300,000 Chinese to visit during the Chinese New Year period from January 24 to February 7 but more than 80 per cent have cancelled, reports the Malaysian Inbound Tourism Association (MITA).
"On average, a Chinese tourist will spend US$900 ($1345) when they visit Malaysia. This means that with the cancellations, we estimate losses of US$216 million ($323 million)," MITA president Uzaidi Udanis told The Australian Financial Review.
Authorities are acting to shore up local businesses and reassure investors, while the country's finance minister has flagged possible stimulus measures.
The health crisis is particularly poorly timed for Malaysia, where the travel industry was hoping 30 million tourists - including 3.2 million Chinese - would this year respond to a big promotional campaign and inject 100 billion ringitt ($36 billion) into the economy. The nation's increasing reliance on tourism means the coronavirus will likely deal a heavier blow than SARS in 2003, when it shaved 0.4 percentage points off of third-quarter growth.
Malaysian-Chinese account for roughly one quarter of Malaysia's population and, as the nation has moved up the development ladder, travel between the two countries has increased. Last year China was the biggest market for Malaysian tourism after Singapore and Indonesia with the appreciating Thai baht prompting some Chinese to look elsewhere.
Singapore's 2020 budget, to be handed down in two weeks, will contain at least 30 economic support measures. These will range from interventions to ensure the financial system doesn't seize up due to reduced liquidity to financial support for companies supplying materials and equipment needed to combat the virus.
Singapore barely escaped a recession last year after the US-China trade war exacerbated structural weaknesses. Lee Hsien Loong's government, which is expected go to the polls this year, was already tipped to unveil a big-spending budget on February 18.
Citi economists, who have shaved their forecast for GDP growth in Singapore this year to 1.3 per cent from 1.8 per cent, believe the government will follow up with other support measure to reduce the impact of the virus on the economy.
"These initial interventions aim to boost confidence, but they are unlikely to be sufficient to curtail a sharp downturn in [the first quarter]", the economists wrote in a research note on Monday.
In Indonesia, the central bank intervened in foreign exchange and bond markets on Monday to prop up the national currency, the rupiah.
Bank Indonesia bought around 1.5 trillion rupiah ($165 million) worth of bonds on the secondary market in morning trading on Monday, and was expected to continue buying until the market closed.
Indonesia's view on banning Chinese travellers has changed dramatically in just a few days. Last week one government minister said it would cause too much of a diplomatic rift to refuse entry to all China nationals. But as of Monday, no travellers who have spent more than 14 days in China are allowed into Indonesia. From Wednesday, all flights between the two countries will be banned indefinitely.
The ban is more bad news from Bali, already reeling from the cancellation of all Chinese package tours. Some businesses on the holiday island have already closed their doors, reports the Bali outpost of the Association of the Indonesian Tour and Travels Agencies (ASITA).
ASITA estimates the island lost at least $US8 million ($12 million) in one week after 20,000 to 25,000 Chinese tourists expected to holiday there during the Lunar New Year failed to show.
Chinese tourists account for about 30 per cent of the Bali tourist market and around 80 ASITA businesses are focused entirely or almost exclusively on that trade.
"We hope the crisis does not last too long," said ASITA's Bali secretary Putu Winastra.