Coronavirus Epidemic: Growth Forecasts for China Drop Significantly

The most recent survey conducted in February (11–19 February 2020) shows the considerable effects the coronavirus epidemic has on growth forecasts for China, with experts expecting real gross domestic product (GDP) to increase by only 5.4 per cent in 2020 and by only 4.2 per cent in the first quarter of this year. The CEP indicator, which is based on the China Economic Panel (CEP) and reflects the economic expectations of international financial market experts for China, rose to a value of 4.4 points in February 2020, thus again finding itself just outside the negative range. When interpreting this increase, however, it must be noted that the forecast horizon of the CEP indicator is twelve months. The experts surveyed therefore do not expect a noticeable improvement until the beginning of 2021, and this starting from an already quite weak situation of minus 10.9 points. Current point forecasts for Chinese real gross domestic product are much more revealing when it comes to the economic development in the coming months.

The first quarter of 2020 is expected to see GDP growth of only 4.2 per cent, coming down from the 6.0 per cent forecast in the January survey. “This sharp decline in forecasts is a consequence of the spreading coronavirus epidemic in China,” says Dr. Michael Schröder, senior researcher in the Research Department “International Finance and Financial Management” at ZEW Mannheim and project leader of the CEP survey. Although the experts expect a return to more normal economic conditions with GDP growth of 5.4 per cent in the second quarter of 2020, this figure is still significantly below January’s forecast of 6.0 per cent. The experts thus expect negative effects of the coronavirus epidemic to hit the second quarter as well.

The forecast for the entire year of 2020 has dropped to a mere 5.4 per cent. This figure is far below the six per cent target set by the Chinese government. “According to the survey participants, the virus epidemic will have a very significant impact on China’s economic development this year. Not until 2021 do the experts expect to see GDP growth of 5.7 per cent, which is the usual growth rate for China,” Schröder summarises.