As the coronavirus pandemic grows, investor attention has largely shifted from backward-looking indicators that confirm the severity of the economic shutdown to more frequently updating trackers of activity. But this week will see the biggest of all Chinese economic readings, due for release on Friday, once again take centre stage. China’s first-quarter GDP is all but certain to have shrunk. The only question is how sharply. The worse Friday’s reading, the slimmer the chances that Beijing can deliver on the “V-shaped” recovery it has assured the world is coming. Tao Wang, head of economic research at UBS, predicts a 10 per cent contraction, which would indicate a devastating impact on employment.
UBS estimates 5om-6om people in the services sector may be without work, with another 20m jobless workers in the industrial and construction sectors. But Ms Wang added that “as economic activities normalise and with the help of policies supporting [small and medium enterprises], we expect these numbers to decline quickly and substantially in the coming quarters”. UBS estimates that job losses may narrow to fewer than 50m bythe end of the first half of 2020. Yet other readings on economic activity are not encouraging. The FT’s own China Economic Activity index shows backsliding after some upward momentum last month, with activity still down close to 40 per cent from pre-outbreak levels. The mostly optimistic mood in financial markets will be tested on Tuesday when IMF chief economist Gita Gopinath outlines the latest global economic outlook at the start of the organisation’s two-day meeting.
In early March, the IMFset aside $5obn to help coronavirus-hit countries. The move was made as it warned that the outbreak would force it to cut its global economic growth forecast to below the 2.9 per cent rate recorded last year.