Trade credit insurer Atradius has analysed the impact of the coronavirus pandemic on five Asian markets - India, Japan, Indonesia, Thailand and Vietnam - revealing economic contraction, sharp swings in export rates and a rise in business insolvencies. 

Darren Power, regional manager for Atradius UK’s northern region, said: “The global economy has been rocked by the coronavirus pandemic which has been indiscriminate in its international impact. With no exception, the road ahead for these five markets is anything but smooth. However, risk has always been an inherent part of global trade and as firms seek to overcome the current challenges… In these uncertain times, a comprehensive risk management strategy will set businesses apart to weather these challenging times.”

Key highlights from the reports include: 

India: The repercussions of coronavirus have hit an already weakening economy which grew just 4.9% in 2019, the lowest annual increase in more than six years due to a sharp credit slowdown. In 2020, GDP is forecast to contract 5.7%. Both investment and industrial production are also forecast to contract, while exports are expected to decline by almost 13% and household consumption growth expected to contract by about 4% this year. Apart from agriculture, food and financial services, the business performance and credit risk of all main sectors has deteriorated with business insolvencies expected to increase by 75% year on year in 2020.

Japan: GDP in Japan is expected to contract 6% in 2020, driven by a drop in domestic spending and pressure on manufacturers and exporters which have suffered from the global recession and supply chain disruptions. As in India, the Japanese economy already showed signs of weakness prior to 2020 with slowing export growth, less demand from China and increased risk of protectionism. This year, household consumption is expected to contract by almost 6% with a forecast decrease in retail sales of more than 7%. Industrial production is forecast to contract more than 11% in 2020 with a forecast decrease in exports by more than 16%. Business insolvencies are expected to increase 13%, mainly affecting the retail, transport and hospitality sectors while export-orientated businesses will be strained by lower demand, especially for ICT-related products.

Indonesia: After growth of 5% in 2019, Indonesia’s GDP is expected to contract 2.7% in 2020. Annual private consumption growth, a main driver of Indonesia’s economic expansion, is expected to contract 2.3% this year while exports are forecast to decrease around 5%. Sector-wise, domestic transport and services – including tourism – are most severely affected by the coronavirus pandemic while food businesses dependent on imported commodities face higher prices and cash-flow issues due to the rupiah’s depreciation.  Lower demand from China and deteriorating prices will mainly hit producers and exporters in the mining and energy industries.

Thailand: A sharp economic slowdown is expected this year. In 2019, GDP growth slowed to 2.4% due to sluggish global trade, US-China trade tensions and the strength of the Thai baht. Looking forward, the economy is forecast to shrink 5.7% this year. Exports – mainly electronics and automotive – affected by supply chain deteriorations and slowing demand are forecast to contract more than 16% this year. Meanwhile, industrial production is expected to decrease more than 10% and private consumption by 2.6%. In 2021, Thailand’s economy is forecast to rebound with growth of more than 7%, subject to containment of the pandemic and a recovery in the global economy.

Vietnam: 2019 saw robust growth in Vietnam with economic growth of 7% and a surge in exports to the US alongside strong private consumption, investment, rising tourism and export manufacturing. The coronavirus pandemic is expected to slow GDP growth to 2.3% this year, impacting domestic demand and exports; tourism, transport, electronics, textiles and agriculture being the most affected industries. Exports are forecast to contract 5% in 2020 while private consumption growth is expected to slow to about 4% (from 7.3% in 2019). Positively, Vietnam has good long-term prospects with a shift of export manufacturing from China due to its relatively low production costs. Strong promotion and special economic zones make Vietnam attractive for business investment