Investment banks slash China growth outlook — one puts GDP below 4%
Prolonged lockdowns in Shanghai have snarled supply chains and prompted banks to cut China GDP forecasts. Here, a truck leaves a port on April 13, 2022, with healthcare supplies for Shanghai.
Tang Ke | Visual China Group | Getty Images
BEIJING — In just about a week, several investment banks have cut their China growth forecasts as Covid lockdowns drag on in the economic hub of Shanghai.
The new median forecast among nine financial firms tracked by CNBC predicted 4.5% China GDP growth for the full year. That’s well below the official government target for a 5.5% increase.
At the low end of predictions was Nomura with a forecast of 3.9%, down from 4.3% previously.
“The stringently enforced [zero-Covid strategy] causes a big supply shock to the overall economy, especially to cities under full and partial lockdowns,” the Japanese investment bank’s chief China economist Ting Lu said in a report on Wednesday.
“This supply shock may further weaken demand for homes, durable goods and capital goods due to falling income and rising uncertainty,” he said.
Since March, mainland China has battled its worst Covid outbreak since early 2020. Shanghai, home to the world’s busiest port, has been one of the hardest-hit regions. A citywide, two-part lockdown that began about a month ago has dragged on 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 area to control a spike in cases over the weekend.
UBS: The biggest cut
Among nine financial firms, UBS cut its China GDP growth target the most, down by 0.8 percentage points to 4.2% based on “intensified downward pressure on the economy.”
Despite expectations for more policy support, economist Wang Tao said in an April 18 report her team does not expect Beijing to do “whatever it takes” to achieve the official 5.5% target since it was set before the latest wave of Covid and the Russia-Ukraine war.
“We also do not believe that economic impact of Covid policy alone will change the government’s Covid policy shift soon, as minimizing Covid cases and death will likely remain the top priority,” Wang said.
As of Tuesday morning, Shanghai had recorded more than 150 Covid-related deaths.
Bank of America: The second-largest cut
Bank of America’s China economist Helen Qiao made the second-largest cut, down by 0.6 percentage points to 4.8%.
“Covid-19 lockdowns and restrictions imposed in Shanghai and neighboring cities are not only hitting local demand but also causing logistic breakdowns and widespread supply-chain disruptions within and outside of the area,” the bank said in an April 19 report.
“In our view, even if such control measures will ultimately be rolled back and economic activities will gradually normalize by mid-year, a heavy toll on growth already seems inevitable,” the report said.
Allianz Trade: Frequent cuts
Allianz Trade’s forecast reduction marked the second cut in just a few months.
On Wednesday, the firm lowered its GDP forecast to 4.6%, down from 4.9% — which itself was a revision from the 5.2% estimate set around the start of the year.
The first downgrade came after Russia invaded Ukraine in…
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