Citigroup Sees Nearly 1-Point Cut to China’s Quarterly GDP
(Bloomberg) -- A prolonged omicron wave in China could cut economic growth in the second quarter, and future outbreaks pose risks to growth in the rest of the year, according to Citigroup Inc.
Longer lockdowns and tightened quarantine measures may slash China's gross domestic product growth by as much as 0.9 percentage points in the three months through June, Citigroup Inc. analysts Jin Xiaowen and Yu Xiangrong wrote in a note Thursday.
“The economic impact could be enlarged if the virus fails to be contained in April, or if Shanghai fails to complete its two-phase lockdown on schedule,” they wrote.
Areas covering roughly 30% of China's GDP were still deemed at high and medium risk at the end of March. Lockdowns in Shanghai, Jilin and Changchun were extended into the second quarter. The Citigroup analysts said services in at-risk areas will be affected through at least April.
The analysts estimate the Covid wave will drag GDP growth down by 1 percentage point in the first three months of the year, given how widely the virus has spread. The consensus in a Bloomberg survey is for the economy to expand 4.4% in the first quarter and 4.6% in the second.
Chinese President Xi Jinping last month pledged to minimize the economic cost of virus prevention, while still reiterating the country's commitment to Covid Zero, a policy under which authorities lock down entire districts, cities and regions to eradicate all traces of the virus.
Premier Li Keqiang this week also reiterated that stable growth should be a priority and contingency plans should be drafted to deal with possible greater uncertainties. Similarly, the central bank on Wednesday vowed to step up the magnitude of monetary policy and make it more forward-looking, targeted and autonomous.
Even so, the economy has taken a hit during the outbreaks and restrictions. The official manufacturing and non-manufacturing purchasing managers' indexes both contracted in March.
©2022 Bloomberg L.P.
With assistance from Bloomberg
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