Prolonged Lockdowns to Hit Manufacturing and Consumer Demand, with India Benefiting
SINGAPORE: According to a report by Natixis, Singapore is expected to bear the brunt of China’s economic slowdown this year due to prolonged coronavirus lockdowns. The city-state’s economy could experience the largest impact in terms of GDP growth as the disruption to manufacturing and consumer demand in China negatively affects the region’s trade, especially in commodities.
While Singapore does not have significant direct exposure to China, its role as a major trade and commodity hub in Asia makes it indirectly vulnerable to shifts in Chinese demand. As the world’s second-largest importer, China’s slowdown is particularly detrimental to Singapore’s economy, with key sectors like manufacturing and services likely to suffer. Thailand’s economy is also at risk due to its reliance on Chinese tourists.
In contrast, India stands to gain from China’s slowdown, as the reduction in global commodity demand is expected to lower commodity prices and improve India’s terms of trade. This could provide a growth boost for India, which is less reliant on Chinese demand compared to other regional economies.
In the foreign exchange market, Natixis analysts predict that the Australian dollar will experience the most depreciation in the Asia-Pacific region. This is because Australia exports raw materials like iron ore to China, and any decline in demand will have a significant impact on the Australian economy.
The report further estimates that China’s GDP growth will be shaved by 1.5 percentage points due to the lockdowns, lowering its annual growth forecast from 5.2 per cent to 4.2 per cent. If the lockdowns continue for a prolonged period, the economic damage could be even more severe.
