China: Economy to expand “just” 1.8% in 2020 – UOB

Economist Ho Woei Chen, CFA at UOB Group assessed the recently published GDP figures in the Chinese economy.

Key Quotes

“China’s 1Q2020 GDP came in worse than expected at -6.8%y/y… with contractions registered across the primary (-3.2%), secondary (-9.6%) and tertiary (-5.2%) industries. This is China’s first GDP contraction ever recorded.”

“While the secondary industry’s contraction was the worst at -9.6% y/y amongst the industries in 1Q2020, manufacturing nonetheless showed the potential for the fastest recovery as factories restart. March data shows uneven recovery in the Chinese economy with manufacturing registering stronger rebound but consumption and investment remained in double-digit contraction and were also below consensus expectations. As such, we expect the government to target efforts at boosting consumption and investment ahead.”

“We now expect China’s economy to expand by just 1.8% in 2020, down from our earlier projection of 4.1% (2019: 6.1%). This assumes sub-par growth in the next two quarters at 3.5% y/y in 2Q2020 and 4.9% y/y in 3Q2020 and recovery to pre COVID-19 trend growth of 5.7% y/y in 4Q2020.”