(ATF) Moody’s Investors Service has changed to negative its outlook on a dozen Asia Pacific banking systems, as the relentless spread of the coronavirus hammers economies across the region.
Banking systems in Australia, China, India, Indonesia, South Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan, Thailand and Vietnam were revised downwards. Outlooks for all except Thailand were changed from stable. Thailand was positive before the revision.
“The negative outlook reflects Moody's expectation that the broad and growing scope of economic and market disruption from the coronavirus outbreak will increasingly strain banks' operating environment and loan performance,” the rating agency said in a statement.
It said widespread business defaults and restrictions on social interactions will hit economic activity this year, and has projected a contraction in global economic growth in 2020. Last week it said real GDP in the global economy would contract by 0.5% in 2020, followed by a pickup to 3.2% in 2021.
The agency expects the hotel and restaurant, airline, automotive, and retail sectors to be the most severely hit in Asia-Pacific, and said that small and mid-sized enterprises (SMEs) will be particularly vulnerable.
“Although governments have put in place far-reaching support measures designed to shore up the financial position of businesses and soften the negative impact on employment and households, Moody's does not expect these will be sufficient to fully offset the adverse impact of the coronavirus-induced downturn on banks,” it warned.