China’s economy suffers historic slump due to Covid-19
China’s economy shrank for the first time since at least 1992 in the first quarter as the coronavirus outbreak crippled production and spending, increasing pressure on authorities to do more to halt losses. growing jobs.
Gross domestic product (GDP) fell 6.8% in January-March year on year, official data showed on Friday, higher than the 6.5% drop forecast by analysts in a Reuters poll and reversing an expansion of 6% in the fourth quarter of the last year.
The contraction is also the first in the world’s second-largest economy since at least 1992, when official quarterly GDP records began.
While China has managed to revive much of its economy since the shutdown in February, analysts say policymakers face an uphill battle to revive growth as the coronavirus pandemic ravages global demand.
Nomura expects Beijing to come up with a short-term stimulus package, which could be financed by the central bank through various channels.
“However, unlike previous easing cycles, when the bulk of new credit was used to finance spending on infrastructure, real estate and consumer durables, this time we expect the bulk of the new credit be used for financial relief to help businesses, banks and households survive the COVID-19 crisis,” they said in a note.
On a quarterly basis, GDP fell 9.8% in the first three months of the year, the National Bureau of Statistics said, just below expectations of a 9.9% contraction, and by compared to growth of 1.5% in the previous quarter.
Separate data showed China’s industrial production fell 1.1% less than expected in March from a year earlier. Retail sales fell 15.8% over the same period. Investment in fixed assets fell by 16.1% in January-March.
China’s urban unemployment rate was 5.9% in March, down from 6.2% in February.
The pandemic has infected more than 2 million people worldwide and killed more than 130,000 people. China, where the virus first emerged, has reported more than 3,000 deaths, although new infections have fallen significantly from their peak.
Analysts expect nearly 30 million job losses this year due to stuttering job resumptions and falling global demand, surpassing the more than 20 million layoffs during the 2008-09 financial crisis.
Beijing has pledged to take more measures to combat the impact of the pandemic as growing job losses threaten social stability.
The central bank has already eased monetary policy to help unleash the flow of credit to the economy, but its easing so far has been more measured than during the global financial crisis.
The government will also rely on fiscal stimulus to boost infrastructure investment and consumption, which could push the 2020 budget deficit to a record high.
For 2020, China’s economic growth is expected to stumble to its slowest annual pace in nearly half a century, according to a Reuters poll this week.