China reported that its economy already felt the impact of the coronavirus when its first quarter GDP experienced contraction.
Data from the National Bureau of Statistics of China showed that the first quarter GDP contracted by 6.8% in 2020 from a year ago.
According to Reuters, this GDP contraction in the first quarter would be the first slowdown since at least 1992.
Analysts consulted by Reuters gave forecasts for China, saying its economy, particularly its GDP, would decline by 6.5% in the January to March quarter, compared to a year ago.
These predictions from 57 analysts varied from a 28.9% contraction to a 4% expansion. China’s economy rose by 6% in the previous quarter, from September to December 2019.
The bureau reported that China’s first quarter GDP dropped 9.8% as compared to the fourth quarter of 2019. Meanwhile, in the first quarter, retail sales in China shrank by 19% from a year ago while industrial production declined by 8.4% in the same period.
China is reportedly grappling with huge pressure amid rising instabilities brought by the coronavirus outbreak. In addition, the country is being sapped by new difficulties in reopening its economy, particularly work and production, the bureau said.
While the headline GDP figure was not a surprise, the rest of the data did not look good for the months ahead, said Bo Zhuang, chief China economist at TS Lombard.
“What is really important was that before March, everybody was expecting China to have a V-shaped recovery because it was actually (about) China supply disruption, but now we are seeing this demand shock,” Zhuang told CNBC.
“The internal demand shock was massive. That tells us that after coronavirus, even after the lockdowns have been lifted, people are cautious to consume. Shopping malls are open but they are not consuming, and that is the key.”
Industrial production dropped by 1.1% on-year in the month of March, but that is a “false dawn” as lockdowns were discontinued. This means there was a delayed fulfillment of some orders from February, added Zhuang.
Meanwhile, a Reuters poll released a forecast wherein industrial production would fall in March by 7.3% from a year ago.
China, known for having the second largest economy worldwide, had to step back as the government imposed large-scale shutdowns and quarantines to curb the spread of the coronavirus.
China’s economy is attempting to recuperate online, with work resuming in many companies, but it faces challenges ahead.
The latest information was released after exports had a sharp decline in January and February compared to a year ago, while manufacturing activity also crashed.
Meanwhile, a separate Reuters poll revealed that China’s GDP growth may slow sharply to 2.5% in 2020 from 6.1% in 2019.
Zhuang said that China’s industrial production and exports may further shrink in April or May since demand from other countries are low due to the worldwide spread of the coronavirus from mid-March.
Global economy loss
Global economy loss due to coronavirus pandemic will likely turn out as the worst financial crisis since the Great Depression, according to the International Monetary Fund (IMF).
Comparing the current global economy to the Great Depression, the IMF’s chief economist thinks that “we are (now) better off on the health front. On the economic front, I think it makes a big difference that there are lenders of last resort, that monetary policy is proactively able to come in and ensure enough liquidity in markets, that fiscal policy is able to play a major role in supporting firms and households.”
