Signs are emerging that the growth rate of COVID-19 cases may be starting to slow in a number of hotspots, suggesting that lockdowns are working. But it’s also becoming increasingly clear that the economic costs in China and the rest of the world will be significant.
Recent economic news and anecdotal reports suggest that China could see a double-digit quarter-on-quarter fall in GDP in Q1 on a seasonally adjusted basis – larger even than our baseline forecast of a -9% cut.
Meanwhile, some dire business survey readings for the services sector in March, plus mounting evidence of a major broad-based labour market shakeout, support our view that any rebound in China in Q2 will be swamped by slumping activity in the US and Europe.
While we still think that global GDP growth in H2 will rebound sharply, the scale of the fall in H1 suggests that the contraction in GDP through all of 2020 may surpass the -1.1% drop recorded at the height of the global financial crisis.