Coronavirus may cause 6% drop in China's GDP: Report

The coronavirus outbreak may lead to 6 percent contraction in the Chinese GDP, according to a blog on PIMCO blog written by Tiffany Wilding and Nicola Mai.

The deadly coronavirus may hit a severe blow to the Chinese economy and is likely to cause 6% contraction in China’s first-quarter gross domestic product, according to an article on PIMCO (Pacific Investment Management Co.) blog.

According to this article, the GDP contraction, at a quarterly annualized rate, would push down year-on-year growth to 3%, compared with 6% expansion last year. It further warns that its impact will be felt across the world as China accounts for around 25% of global manufacturing activity.

The blog has been written by Tiffany Wilding, a PIMCO economist, and Nicola Mai, a portfolio manager who leads sovereign credit research in Europe.

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“In China, we estimate growth in first-quarter real GDP could contract by 6% (at a quarterly annualized rate), which is a dip to 3% year-over-year growth. Last year, China averaged 6% growth,” the authors wrote.

“The next-hardest-hit economies will likely be in Asia, especially Singapore, Malaysia and Vietnam in Southeast Asia, and Japan and South Korea in Northeast Asia,” they added.

The article also added that the sectors most vulnerable to the shock include energy and autos, followed by gaming, cruise lines, hospitality and airlines.

Goldman Sachs Group Inc. had also predicted that global GDP will shrink on a quarterly basis in the first two quarters of this year because of the coronavirus outbreak, before rebounding in the second half.

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