The scale of the recovery task facing China’s policy makers will be laid bare Friday when first quarter gross domestic product data is expected to show an historic slump.
The median forecast of economists surveyed by Bloomberg is for a 6% contraction in the first three months of the year, when the coronavirus outbreak forced an unprecedented lockdown of factories, stores and schools across the country. Bloomberg Economics warns the dive may be as deep as 11%. At the same time, the government will also release data for retail sales, fixed asset investment and industrial output for March, offering the most complete picture yet of the economic destruction since the virus outbreak. Economy contracted last quarter for first time in data back to 1992
Unlike the rapid-fire policy response seen in the U.S. and Europe as the disease shuttered economies there, Chinese authorities have offered targeted support and modest monetary easing as they focused on containing the virus’s spread. The first quarter data will provide policy makers a clearer picture of what’ll be needed if they’re to meet long-term economic growth goals.
Indeed, authorities have recently added urgency to their policy response. Credit provision hit a record in March and top leaders last week pledged to expand domestic demand to boost public consumption and investment, as well as faster construction of investment projects, Xinhua News Agency reported, citing a politburo meeting chaired by President Xi Jinping.
Gradual Recovery
“China’s economy is going to recover only gradually,” said Scott Kennedy, senior adviser and trustee chair in Chinese business and economics at the Center for Strategic & International Studies. “If the government over-stimulates, the only result will be a lot of wasted spending and greater debt. And that won’t help resolve the core problem of China’s economy: low productivity.”