THE WORLD BANK is forecasting that China’s economy will barely grow this year as a result of the Covid-19 pandemic. In its newly published Global Economic Prospects, the Bank has pencilled in GDP growth of 1% for the year. That would be 4.9 percentage points below its previous projections made in January, and 5.1% lower than 2019’s figure.
The Bank notes that the economy has been gradually getting back to normal in the second quarter following the easing of lockdowns. Its charts indicate the devastation to the economy those caused.
However, the Bank also points out that:
Companies continue to face funding shortages and depressed external demand. The authorities have implemented monetary and fiscal policies to cushion the economic impact of the outbreak. These have included the provision of significant liquidity injections, tax relief, emergency health and welfare spending worth approximately 2.8 percent of GDP, and the authorization of additional special central and local government bond issuances equivalent to about 2.6 per cent of GDP.
Whether those will help the economy hit the Bank’s forecast of 6.9% growth in 2020 will probably turn on when services start to catch up with the recovery seen in the industrial sector and on the pace and extent of the recovery in global demand.
The pandemic has halted international travel and tourism and disrupted global value chains, resulting in a contraction in global trade while domestic lockdowns have plunged many of the countries China’s exporters rely on into recession. The Bank is forecasting 2020 contractions across the advanced economies and just about everywhere else with the exception of East Asia and the Pacific.
Second and subsequent waves of infection remain a wildcard.
Authorities will be more concerned about hitting the ambitious jobs target that has replaced that for annual GDP growth.