Mar 18, 2020 08:39 PM

Chinese Economy May See First Quarterly Contraction Since 1992


China’s economy could soon see its first quarterly decline since 1992 due to the ongoing coronavirus pandemic.

Several financial institutions have lowered their forecasts of China’s GDP performance after the National Bureau of Statistics (NBS) released data showing major economic indicators, including infrastructure investment, factory output and retail sales, plunged by double-digit percentages in the first two months of this year.

Goldman Sachs (Asia) Ltd. revised down its projection for China’s first quarter GDP to a year-on-year contraction of 9% from a previous estimate of 2.5% growth, according to a Tuesday research note. Standard Chartered Bank wrote in a Monday note that it had lowered its estimate to a 4.2% year-on-year decline from 2.8% growth.

Wang Tao, an economist of UBS Group AG, wrote in a Caixin column Wednesday that she had lowered (link in Chinese) her first-quarter GDP forecast to a 5% decline and full-year estimate to 1.5% growth. Morgan Stanley forecasted China’s economy will contract 5% year-on-year in the first quarter before rebounding into expansionary territory in the second quarter in a Tuesday report.

The novel coronavirus outbreak that began in December has been largely brought under control in China, but it is spreading rapidly outside the country. As of Wednesday afternoon, the virus had infected nearly 200,000 people worldwide, including over 81,000 in China, killing almost 8,000.

Read more of Caixin’s coverage of the new coronavirus.

Forecasts chart 1

Goldman Sachs wrote that though China has brought the coronavirus under control within its borders, the pandemic will constrain an economic rebound in the second quarter. They forecasted economic contraction in the U.S., the euro area and Japan in the coming quarter will weaken external demand for Chinese goods and services.

Those factors mean China’s economy will only grow 1.5% in the second quarter, the investment bank estimated. It also lowered its estimate of China’s 2020 full-year GDP growth to 3% from 5.5%.

UBS economist Wang was more pessimistic. She estimated full-year growth would be 1.5%, even if the Chinese government hands out more than 2% of GDP in fiscal support measures and further eases monetary and credit policies. She said full-year GDP growth is not likely to surpass 3% even with a better-than-expected rebound in real estate and more-than-expected fiscal stimulus.

However, as the global economy is set to gradually recover once the pandemic is under control, Wang forecasted China’s GDP growth will rebound to 7.5% in 2021.

Economists with Standard Chartered are more optimistic. They wrote that though the coronavirus impact is likely to reduce external demand, the losses could be partly offset by China’s relatively stronger ability to resume and maintain production compared with other countries. They forecasted a strong recovery in the economy driven by increased policy support — with GDP growing 6.1% in the second quarter, 6.3% in the third quarter and 6.4% in the fourth quarter. Their full-year GDP projection was 4%, down from 5.5% previously.

China’s GDP grew 6.4% in the first quarter of last year and expanded 6.9% in the same period in 2018, according to the NBS.

Contact reporter Tang Ziyi ( and editor Gavin Cross (

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