Chinese economy headed for its first quarterly contraction since 1992

China’s economy may soon face its first quarterly decline since 1992 due to the negative effects of the ongoing coronavirus pandemic.

A number of financial institutions downgraded China’s Gross Domestic Product (GDP) projections after the National Bureau of Statistics released data showing key economic indicators, including investment in infrastructure, factory production, and retail sales, down by double digits in the first two months. this year.

Goldman Sachs (Asia) revised its forecast for Chinese GDP for the first quarter to shrink year-on-year by 9% from a previous estimate of 2.5% growth.

Standard Chartered Bank wrote in a note Monday that it had lowered its forecast to a 4.2% decline year-on-year from a 2.8% expansion.

UBS Group AG lowered its Chinese GDP forecast for the first quarter to a fall of 5% and a year-on-year forecast of only 1.5%.

Morgan Stanley forecasts that the Chinese economy will shrink by 5% YoY in the first quarter before returning for expansion in the second quarter.

The COVID-19 epidemic, which broke out in December, has largely been brought under control in China, but has spread rapidly outside the country. As of Wednesday afternoon, the virus had infected nearly 250,000 people worldwide, including more than 81,000 in China, killing nearly 11,000.

Goldman Sachs wrote that while China already controls the coronavirus within its borders, the pandemic will curb economic recovery in the second quarter. The lender forecasts that the economic contraction in the US, euro area and Japan will weaken the external demand for Chinese goods and services in the next quarter.

These factors mean that China’s economy will grow by only 1.5% in the second quarter, the bank estimates. It also lowered its estimate of Chinese GDP growth for the whole year to 3% from 5.5%.

UBS economists are more pessimistic. They estimate that China’s year-round economic growth will be 1.5%, even if the Chinese government provides additional financial support and monetary and credit policy relief. UBS estimates that year-on-year GDP growth is unlikely to exceed 3%, even with better-than-expected real estate recovery and better fiscal stimulus.

However, as the global economy begins to recover gradually once the pandemic is overcome, Wang forecasts China’s GDP growth will recover to 7.5% in 2021.

Economists with Standard Chartered are more optimistic than they are. They wrote that while the impact of the coronavirus is likely to reduce external demand, losses may be partially offset by China’s relatively stronger ability to resume and sustain production than other countries. Standard Chartered’s experts forecast a strong economic recovery driven by Beijing’s increased support – with GDP growing 6.1% in the second quarter, 6.3% in the third quarter and 6.4% in the fourth quarter. The GDP forecast for the whole year is 4%, which is lower than previously expected 5.5%.

China’s GDP grew 6.4% in the first quarter of last year and increased by 6.9% over the same period in 2018.