Coronavirus Dented Optimism Over Easing Trade War: Moody's

The coronavirus outbreak in China has put global growth at risk yet again, at a time when the global economy started to recover from the trade war between the two largest economies in the world: China and the US, Moody's said on Monday.

Moody's said that two positive developments had raised the prospects of an incipient stabilisation of global growth this year: a truce in the US-China trade war with the signing of the "phase-one" trade deal in January, and nascent signs of a pickup in the industrial sector, which had been hurt by slower growth in China and trade tensions.

"But the outbreak of the coronavirus has dented this optimism. With the virus continuing to spread within China and to other parts of the world, it is still too early to make a final assessment of the impact on China and the global economy," it said.

Moody's added that the fear of contagion has led to temporary shutdown of businesses, markets and cities throughout China, which will negatively affect commerce in the country.

"The outbreak will primarily hurt China's economy by lowering discretionary consumer spending on transportation, retail, tourism and entertainment. There is already evidence - albeit anecdotal - that supply chains are being disrupted, including outside China," it added.

According to Moody's, if the outbreak persists, domestic and international supply chain disruptions are likely to become significant, amplifying the shock to the global economy.