China coronavirus: public health measures will hurt economy in the first quarter, analysts say

Effects of disease control policies could see ‘economic growth slow by as much as four percentage points’ in the quarter, Plenum Group says

Lockdowns within Hubei province could depress national gross domestic product another 1.5 percentage points, it adds

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Analysts says the coronavirus contagion, and responses to it, will hurt China’s first-quarter economic results, with potential to spill into the longer term. Photo: AFP

Published: 6:15am, 28 Jan 2020Updated: 2:07pm, 17 Feb 2020

China’s already weakening economy is set to take another hit with businesses across the country remaining shut for an extended public holiday and tourism grinding to a halt, as authorities struggle to contain the pneumonia-like coronavirus that has spread across the nation.

Analysts said the virus control measures would affect first-quarter economic results, with a potential to spill into the longer term.

A former Chinese government adviser called for measures such as reducing the tax burden for small and medium-sized enterprises to stimulate the economy.

The China-focused research group Plenum predicted on Monday that effects of disease control policies could see “economic growth slow by as much as four percentage points” in the first quarter, amplified by the fact that the public health crisis is taking place during China’s peak travel season.

The government’s extension of the Lunar New Year public holiday period – which will keep workers at home for an additional three days until Sunday – could shave two percentage points off overall outputs in the first quarter, Plenum analysts said.

Additionally, the lockdowns within Hubei province, where 14 cities including Wuhan – the capital and epicentre of the virus – have cancelled all inbound and outbound transport, could pull down national gross domestic product (GDP) another 1.5 percentage points. Those changes would add to impacts on tourism, transport, retail and catering across the country, accounting for another 0.4 per cent dent to the economy, the group said.

The transport sector was poised to see “huge losses”, Plenum said, noting that the volume of airline transport and railway transport fell by 40 per cent year on year on the first day of the Lunar New Year. If that decline extended for the week, the two transit industries would lose 6.4 per cent of annual revenue, or 64 billion yuan (US$9.2 billion), they said.