NEW YORK/MANILA -- Emerging countries are cutting interest rates to shield their economies from the fallout of the deadly coronavirus outbreak that has brought industrial and consumer activity in much of China to a standstill.
Developing and emerging nations grew 3.7% last year, the slowest pace since 2009, the International Monetary Fund says. Though the IMF predicted in early January that growth would pick up to 4.4% this year, the outbreak centered in China could dash hopes of a rebound by paralyzing a vital trade partner and source of tourism for many of these countries.
The Philippine central bank cited the outbreak in its decision on Feb. 6 to lower its policy rate by 25 basis points to 3.75%, the first cut since September.
"The spread of the 2019 novel coronavirus could have an adverse impact on economic activity and market sentiment in the coming months," central bank Gov. Benjamin Diokno told reporters after the meeting.
Taking into account potential hits to the tourism industry and the remittances from Philippine nationals working abroad, the virus could lop 0.3 percentage point off real gross domestic product growth this year, Diokno said.
The cut followed the Bank of Thailand dropping its policy rate on Feb. 5 to a record low of 1% from 1.25%, a move that surprised many.
The country saw a 60% plunge in visitors from China during Lunar New Year, squeezing a tourism sector that generates nearly 20% of Thailand's GDP. Thailand's Finance Ministry in late January cut its growth outlook for the year to 2.8% from 3.3%.
Also on Feb. 5, Brazil's central bank opted for a cut of 25 basis points to an all-time low of 4.25%. Though the outbreak was not cited in the bank's decision, analysts worry that a slowdown in Chinese industrial activity will dent Brazilian exports of resources such as iron ore.
The median policy interest rate for emerging economies fell below 3% for the first time in January to 2.75%, data from the Bank for International Settlements shows. Malaysia, Turkey and South Africa all cut their rates last month.
Thailand and the Philippines, where inflation is relatively controlled, have flexibility when it comes to easing. But countries faced with surging prices, weak currencies or the risk of capital flight lack leeway for defensive cuts.
The Reserve Bank of India decided on Feb. 6 to keep interest rates at 5.15%. The government projects that real economic growth will slow to 5% for the fiscal year ending March 31, an 11-year low. But fears of accelerating inflation -- fueled partly by a string of rate cuts last year -- have left the central bank with less room to maneuver.
And in Brazil, where the real softened to an all-time low against the dollar last month, the central bank has indicated it will hold off on further cuts. The policy committee said that it "deems appropriate to interrupt the monetary easing process," as "the current stage of the business cycle recommends caution."