Morgan Stanley sees virus dragging growth in Asia

Bloomberg

Most Asian economies will suffer their biggest blow from coronavirus containment measures in the second quarter of the year, even as the worst seems to have passed already for China, according to Morgan Stanley.
Asia excluding Japan will see two consecutive quarters of contraction — the technical definition of a recession — as lockdowns and social-distancing norms are still being tightened or extended in countries where infections have yet to peak, economists including Deyi Tan wrote in a note.
For example, India, Malaysia, and the Philippines have extended lockdowns in their countries, Indonesia has expanded social-distancing norms to the greater Jakarta area and
Singapore has stepped up enforcement of its “circuit-breaker” measures over the past two weeks.
Economic output in Asia ex-Japan will shrink by 1% in the second quarter, Morgan Stanley estimates, projecting that nine of 10 economies it tracks in the region will contract from April to June. If China is removed from the calculation too, the region’s economies will shrink 3.8% in the second quarter, the bank estimates.
China, which suffered its first contraction in decades in the first quarter, will grow by 1.5% in the second
quarter, the report said.
“We think AxJ is likely to slow in waves, with China seeing its worst in 1Q20,” the economists wrote in the note. “Beyond the growth through, the continuation of steady-state soft social distancing until a vaccine is found is likely to cap the pace of recovery” in the second half of the year.
Macro indicators have mostly weakened or stabilized at low levels for Asia excluding Japan. Some sectors in China, including production and services, have returned to 75%-95% of normal levels from lows reached in February, the economists wrote.