Economic impact of the pandemic in China

13th February 2020
-News, IAM

Hugues Chevalier, Economist

Since the outbreak of the Wuhan Coronavirus a few weeks ago, many economic sectors have been on halt. In particular, consumption and tourism-related sectors, which represent around 16% of the GDP, have been severely affected and still will be in the coming weeks. In many provinces, such as Guangdong, Shanghai and Zhejiang, the Chinese New Year vacations have been extended for 1 week. The first quarter GDP will be revised downwards 1.5 point, at 4.5%, against 6% forecasted. The central bank (PBoC) has already lowered its short-term policy by 10bp in a bid to support the economy, which is, in net terms, an injection of liquidity of around CNY 150bn. However, the impact of this pandemic should not be overestimated on the middle term. Indeed, at the end of the pandemic, the disruption to the economy will be shot-lived and a strong recovery will follow this outbreak, as after the SARS outbreak in 2003.