Growth Forecasts for China Down Again
China Economic Panel
24.03.2020
Effects of the Corona Crisis Unbroken
The coronavirus pandemic continues to leave a deep mark in the growth forecasts for China for 2020 and 2021, with the growth forecasts for real gross domestic product (GDP) dropping heavily again after an already significant decline in the previous month. This is the main result of the March survey (9–18 March 2020) among international financial market experts for China. The survey is regularly conducted by ZEW Mannheim and Fudan University (Shanghai) on the basis of the China Economic Panel (CEP).
In March, experts from the survey lowered their forecasts for GDP growth in the current year to only 4.3 per cent, compared to 5.4 per cent in the previous month and 5.9 per cent in January.
According to current forecasts, China’s real GDP is expected to increase by 2.1 per cent in the first quarter of 2020 and by 4.2 per cent in the second quarter, as compared to last year’s first and second quarters. “This would mean an extreme decline in economic growth for 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.
According to the financial market experts, the situation will only start to gradually improve in the second half of 2020, with the survey participants then expecting a return to almost ‘normal’ growth rates of 5.5 per cent in 2021.
Improvement in the Chinese economy not expected until early 2021
The CEP indicator, which is based on the China Economic Panel and reflects the economic expectations of the international financial market experts for China, has risen – in contrast to growth forecasts – to a value of 11.1 points in March 2020 and is thus 6.7 points higher than February’s 4.4 points. “When interpreting this increase, however, it must be kept in mind that the forecast horizon of the CEP indicator is twelve months, and the assessment of the situation has now fallen to a very low value of minus 26.4 points,” explains Michael Schröder.
Considering this currently very unfavourable situation, the experts surveyed do not expect a noticeable improvement in the Chinese economy until early 2021. The current point forecasts for the development of real Chinese GDP (mentioned above) are therefore much more revealing with regard to China’s economic development in the coming months. “The weakness of China’s economic situation is demonstrated, among other things, by the fact that property prices are expected to fall in all major economic regions, which might mark a temporary end to the real estate boom that has already lasted for years,” says Schröder.
The survey participants also expect a considerable increase in government spending in China, including a sharp rise in domestic and foreign debt. Employment is expected to decline due to weak growth.