Prolonged shutdowns in Shanghai have disrupted supply chains and prompted banks to cut Chinese GDP forecasts. Here, a truck leaves a port on April 13, 2022, with healthcare supplies for Shanghai.
Tang Ki | China Optical Group | Getty Images
BEIJING – In about a week, many investment banks lowered their growth forecasts for China as COVID-19 lockdowns continued in the economic hub of Shanghai.
The new median forecast among nine financial firms tracked by CNBC forecast Chinese GDP growth of 4.5% for the full year. This is well below the official government target for a 5.5% increase.
On the lower end of forecasts, Nomura was forecasting 3.9%, down from 4.3% previously.
Strictly enforced [zero-Covid strategy] “It causes a major supply shock to the overall economy, especially to cities that are under full and partial lockdown,” Japan Investment Bank’s chief China economist Ting Lu said in a report on Wednesday.
“The supply shock may further weaken the demand for homes, durables and capital goods due to lower incomes and increased uncertainty,” he said.
Since March, mainland China has battled the worst outbreak of the COVID-19 virus since early 2020. Shanghai, home to the world’s busiest port, It was one of the hardest hit areas. The two-part citywide shutdown that began about a month ago has continued with no clear end in sight.
A major business district in Beijing, The national capital began three days of mass testing on Monday and closed non-essential businesses in one region to control a surge in cases over the weekend.
UPS: The Biggest Cut
Among the nine financial firms, UBS cut its GDP growth target for China to the maximum, dropping 0.8 percentage point to 4.2% on the basis of “intense downward pressure on the economy”.
Despite expectations of more political support, economist Wang Tao said in a report dated April 18 that her team does not expect Beijing to do “whatever it takes” to achieve Official target 5.5% Since it was set before the last wave of Covid and the Russo-Ukrainian war.
“We also do not believe that the economic impact of COVID policy alone will change the government’s policy shift on COVID soon, as reducing COVID-19 cases and deaths is likely to remain a top priority,” Wang said.
As of Tuesday morning, Shanghai had recorded more than 150 deaths linked to Covid.
Bank of America: the second largest reduction
Chinese economist Helen Qiao at Bank of America made the second-largest cut, down 0.6 percentage point to 4.8%.
“The Covid-19 lockdowns and restrictions in Shanghai and neighboring cities are not only hurting domestic demand, but also causing logistical disruptions and widespread disruptions to the supply chain within the region and beyond,” the bank said in its April 19 report.
“In our view, even if these control measures are eventually rolled back and economic activities will gradually return to normal by the middle of the year, the heavy burden of growth already appears inevitable,” the report said.
Allianz Trade: Frequent Sale
Allianz Trade’s expected cut was the second in just a few months.
On Wednesday, the company lowered its GDP forecast to 4.6%, down from 4.9% – which itself was a revision from the 5.2% estimate set at the start of the year.
The first downgrade came after Russia’s invasion of Ukraine in late February, and the second downgrade assumes Shanghai’s lockdown lasts a month before returning closer to pre-pandemic levels in May, according to Françoise Huang, chief economist at Allianz Trade.
If the lockdown in Shanghai continues for two months and other large cities are affected, it expects China’s GDP to grow by just 3.8% this year.
last week , International Monetary Fund also lowered GDP forecast for China For the second time this year. The new estimates call for growth of 4.4%, down from a reduction in January to 4.8%, versus the International Monetary Fund’s October forecast of 5.6% growth in 2022.
JPMorgan, Barclays: The cut after the GDP data
China reported on April 18 that First-quarter GDP grew by a larger-than-expected 4.8%, With industrial production and investment in fixed assets also exceeding expectations. But retail sales shrank by more than expected 3.5%.
Later that day, JPMorgan cut its full-year GDP forecast to 4.6%, down from 4.9% previously. The bulk of the downgrade came from lower expectations for consumption growth, with exports unchanged and investment down 0.1 percentage point.
“That shouldn’t be surprising [the] “Omicron’s drag on economic activity will be greater in April than it was in March,” said the bank’s Emerging Markets Asia Economics and Policy Team. They estimated that parts of China accounting for about 25% of national GDP were in full or partial lockdown as of early April. .
Also on April 18, Barclays cut its full-year GDP forecast to 4.3%, down from 4.5%, on expectations that the Covid disruptions will continue for a while.
Morgan Stanley had already lowered its forecast again on March 31, to 4.6% from 5.1% previously. Economist Robin Sheng and his team said that China likely won’t end its COVID non-proliferation policy even after a policy reshuffle scheduled for the fall.
“This means that sporadic shutdowns across the country in the next two quarters will limit consumption, even as production is protected through closed-loop management systems,” the report said.
Citi, Goldman Sachs: Consistency
Not all banks have lowered their GDP forecasts for China.
Citi on April 18 raised its estimate to 5.1% after China’s GDP beat in the first quarter. In late March, the bank was It raised its forecast to 5%. Growth of 4.7% based on better-than-expected economic data in January and February, and expectations of stronger government support.
Goldman Sachs said last week that it kept its Chinese GDP forecast at 4.5% for the year after the release of first-quarter data.
“We believe the negative impact of Covid may extend into April and beyond and expect a weak start to the second quarter, despite the stronger-than-expected GDP reading for the first quarter,” Lisheng Wang and team said in their April 18 report. They expect more easing measures in the coming months to support growth.
The investment bank had raised its forecast for gross domestic product in January to 4.5% after it… Q4 GDP report is better than expected. Earlier that month, Goldman Sachs announced Expect 4.3%down from 4.8%, based on expectations that consumption will be further affected as China tries to control a highly transmissible omicron variant.
CNBC’s Michael Bloom contributed to this report.
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