The Coronavirus outbreak, the Australian bushfires, continuing US-China geopolitical and trade tensions and damage caused by Tropical Cyclones Tino and Sarai have seen 2020 get off to a difficult start in our region. Pair that with sensitive regional trade negotiations, a New Zealand election and Brexit, and Pacific island countries are looking to downgrade economic growth projections across the board.
As we went to press, coronavirus (or COVID-19) diagnoses stood at almost 77,800 globally. There had been 2348 confirmed deaths and cases confirmed in 28 countries, including Australia. There had been no cases recorded in any Pacific Island nations.
Oxford Economics has projected COVID-19 will cost the global economy over US$1tn (representing a 0.5 per cent fall in global GDP) if it becomes a pandemic and spreads beyond Asia. The firm’s economic modelling suggests the virus is already having a “chilling” effect as company after company report amended revenue forecasts as a result of production challenges and supply problems. China’s GDP will fall from 6 per cent last year to 5.4 per cent in 2020 predicts Oxford Economics. ANZ Research predicts a greater impact, a decline in GDP to 5 per cent.
While Pacific Island nations have significant, and growing links with China, it’s the impact of the coronavirus, on top of the devastating summer 2019/20 bushfires on close neighbour Australia that may have the more significant immediate impact.
Australia’s Reserve Bank says the coronavirus poses a material threat to Australia’s economy. It had already estimated the bushfires would cut economic growth by 0.2 percentage points in the December and March quarters, and that drought will cut GDP by a further 0.25 per cent throughout this year. Deloitte Access Economics says the coronavirus will cut $1.8 billion from budget revenues.
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