Asian economies cut rates, move to blunt impact of coronavirus

About 10 percent of Thailand’s economy hinges on exports to Beijing, which are vulnerable to shocks from a further slowdown in China’s economy. (AP)

• Bank of Thailand cut its prime rate to a record low 1 percent from 1.25 percent on Wednesday
• The Philippine central bank is due to update its monetary stance

BANGKOK: Thailand’s central bank cut its benchmark interest rate and other Asian countries look set to follow suit as they seek ways to soften the impact of the outbreak of a virus in China that has killed more than 560 people.
The Bank of Thailand cut the prime rate to a record low 1 percent from 1.25 percent on Wednesday to help the economy weather a series of setbacks.
Many of China’s neighbors are reeling from plunging tourist arrivals and other adverse impacts from the outbreak that has spread from the central Chinese city of Wuhan to more than 20 countries.
Governments and central banks have indicated they’re prepared to act to prevent the outbreak from throwing regional economies into chaos.
The Bank of Thailand said the softer credit policy would help businesses and households cope as risks rise from mounting debt.
A severe drought and uncertainties brought on by the trade war between China and the US are also casting a shadow over the outlook for one of Southeast Asia’s biggest economies.
“The Thai economy would expand at a slower rate in 2020 than previously forecasted and much further below its potential due to the impact of the outbreak of coronavirus,” a delay in enacting the annual budget and the drought, the central bank said in a statement.
“Exports of goods would decline in line with trading partner economies and potential impacts of regional supply chain disruptions,” it said.
Analysts are predicting that the central bank will cut the benchmark rate by another 0.25 percentage point, perhaps as soon as March.
Singapore, the Philippines and Indonesia are among other countries that have signaled a readiness to adjust policies if need be.
The Monetary Authority of Singapore said Wednesday that it had “sufficient room” to ease the exchange rate “in line with the weakening of economic conditions as a result of the outbreak.”
The Philippine central bank is due to update its monetary stance on Thursday.
About 10 percent of Thailand’s economy hinges on exports to China. The share of such exports is even higher for Vietnam, Taiwan, South Korea and Malaysia.
Exporters of major commodities like oil, coal and iron ore also are vulnerable to shocks from a further slowdown in China’s economy.
The trend toward easing credit began last year as relations between China and the US dipped to their worst in decades and is expected to continue.
Analysts at Fitch Solutions Macro Research said Wednesday that they estimate regional growth could slow to 4.0 percent from 4.3 percent in 2019 if the outbreak leads to a much slower rate of growth for China. Economists already are forecasting that China’s economy, the world’s second largest, will expand at about a 5 percent pace in 2020, down from 6.1 percent last year.
The Fitch report reckons that China accounts for more than two-thirds of growth for developing economies in Asia and for almost 80 percent of travel.
Apart from the interest rate cut, Thai authorities have taken a series of steps to ease conditions for businesses, including tax cuts, easing loan repayment terms and extending the deadline for filing personal income tax from March to June.