China's economy is expected to slow to worst pace since financial crisis as coronavirus spreads

China coronavirus disinfectant

  • A deadly viral outbreak is dragging on activity in China and throughout the world.
  • That could drag the second-largest economy to its slowest pace of growth since the 2008 global financial crisis, according to a new poll.
  • But economists expect that the economy will recover as soon as the second quarter, propping up full-year growth.
  • Visit Business Insider's homepage for more stories.

China could expand at the slowest pace since the 2008 global financial crisis this quarter, as a deadly viral outbreak drags on activity in the second-largest economy, a poll showed on Friday.

Economic growth is expected to slump to 4.5% in the first quarter from 6% in the previous one, according to the Reuters poll of 40 economists based in mainland China, Hong Kong, Singapore, Europe, and the US. The poll was conducted February 7-13.Advertisement

The novel coronavirus has killed more than 1,350 and sickened tens of thousands more in at least two dozen countries, the World Health Organization said in its latest situation report. China, the epicenter of the outbreak, has seen fatalities and new cases rise sharply in recent days.

Sustained disruptions could drag 2020 growth to 5.5%, the poll said, which would be its slowest pace since at least the 1990s and compared with 6.1% in 2019. But economists expect that the economy will recover as soon as the second quarter, propping up full-year growth.

"A patchwork of quarantine policies, unpredictable supply chain interruptions and continued contagion risks suggest a return to full capacity remains weeks away," said Mark Haefele, the chief investment officer at UBS. "But despite these challenges, we still expect the economic and earnings impact to be relatively contained, and limited mostly to China."
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Moody's Analytics revised its GDP forecast for China 0.2% lower for the first quarter, adding that growth was likely to rebound. Still, the financial intelligence firm noted that significant uncertainty remained.

"The impact on China's economy in the first quarter won't be known for a little bit," said Ryan Sweet, an economist at Moody's. "We won't get hard data on the impact of the coronavirus until sometime in March, and even those will be backward-looking."
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