The ASEAN-5 economies -- Malaysia, the Philippines, Indonesia, Vietnam and Thailand -- have taken steps to mitigate the economic damage of the coronavirus outbreak but these will not offset the rising recessionary or credit risks for most sectors, Moody's Investors Service said on Monday.
The support packages vary in scale and scope and are largely contingent in nature. "While they will broadly help reduce some of the negative effects of the crisis, they will not offset the rising recessionary or credit risks for most sectors," said Moody's in its latest credit outlook report.
Policy measures will provide a degree of support but the confluence of shocks will weigh on growth prospects. The growth slowdown in the region will be significant relative to previous crisis episodes but will still be moderate compared to other regions.
Nonetheless, the ASEAN-5 are negatively impacted by sharp falls in external trade flows, sluggish commodity prices that weigh on the fiscal revenues of commodity exporters and financial market volatility that can trigger capital outflows.
Policy measures will have significant fiscal costs. Government revenue across the region will decline and spending will rise as countries try to mitigate the effects of the crisis. Fiscal costs of support measures will be significant with debt burdens only stabilising from 2021 for most economies.
However, said Moody's, the ASEAN-5 countries had adequate fiscal buffers before the pandemic that gives them fiscal space to respond to the crisis.
Credit risks for banks have increased despite policy support. Policy measures have mostly focused on providing liquidity to banks to support new lending and through credit restructuring such as debt moratoriums. As moratoriums are lifted, banks' problem loans will likely increase.
Few corporate sectors will benefit directly from government support. Strategically important state-owned enterprises will likely take priority in receiving direct financial support. Privately-owned companies will get some support from broader policy measures such as temporary tax relief and lower interest rates.
The infrastructure sector will get limited policy support but essentiality of services may help shore up demand for some companies. With the exception of Indonesia, few countries in the region have taken steps to support utilities and other infrastructure companies.
Governments have instead shifted some of the burden related to policy support to the utilities and other infrastructure providers.