At the end of 2019, economic debate in China centred on whether the country should aim for 6 per cent growth the following year – a conversation that was rapidly turned on its head by the coronavirus.
As the situation steadily worsened, first in China and then across the globe, growth forecasts were slashed as the death toll mounted.
Revisiting these increasingly pessimistic forecasts highlights how quickly assumptions were turned on their heads by a disease that has now infected more than 84 million people and killed over 1.8 million.
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In October 2019, the International Monetary Fund (IMF) forecast that the world economy would grow by 3.4 in 2020, up from 3 per cent the previous year, while the Chinese economy would grow by 5.8 per cent. Meanwhile, the World Bank projected that China would see 5.9 per cent growth.
At the time, these forecasts were cause for worry in some Chinese policymaking circles. All eyes were on Beijing to see whether the Chinese Communist Party would be able to fulfil a commitment made in 2012: to double the size of the economy over a decade by the end of 2020.
There was also some debate about whether the country should aim for 6 per cent growth to prevent a slowdown, or whether it was an unnecessary and unrealistic target.
But then a mysterious “viral pneumonia” was detected in Wuhan. Just 27 infections had been officially recorded at the end of December and officials said no human-to-human infections had been identified.
By January 7 it had been identified as a member of the coronavirus family and two weeks later it was confirmed that it could be transmitted from person to person.
Meanwhile, the IMF had revised its growth forecasts, projecting 3.3 per cent growth for the global economy and raising the Chinese figure by 0.2 points to 6 per cent after Beijing reached a phase one trade deal with the US that would have seen some punitive tariffs removed.
That same month, the World Bank confirmed its projection that China would grow 5.9 per cent.
But the coronavirus, as the new disease would become known, was already spreading rapidly and causing the economy to grind to a halt. In the coming weeks first Wuhan and Hubei province went into strict lockdown, followed by most other Chinese cities.
By March 5, as the disease started spreading across the world, and with most Chinese factories having suspended production, IMF managing director Kristalina Georgieva said the organisation had cut its 2020 growth outlook for China to below 5.6 per cent.
The World Health Organization did not declare the coronavirus to be a global pandemic until March 11, when more than 118,000 cases in over 110 countries had been reported. The agency was widely criticised at the time for acting too slowly to marshal the world’s resources to fight the virus.
On March 31, the World Bank said the outbreak was expected to slash China’s growth to 2.3 per cent under the best-case scenario, but under the worst-case scenario, the country’s growth rate could fall to a paltry 0.1 per cent.
By mid-April, only three months after the buoyant forecasts in January, the world was looking at its worst economic recession in living memory.
On April 14, the IMF said the global economy was expected to shrink by 3 per cent during 2020. China, where production had started to resume after the outbreak peaked in the first quarter, was still projected to record positive growth – but this figure had been revised down to 1.2 per cent.
In June, both the IMF and the World Bank forecast China’s economy would grow 1 per cent in 2020.
But by now the World Bank expected the global economy to shrink by 5.2 per cent in 2020, the deepest recession since the Great Depression of the 1930s, and the IMF projected that global growth would shrink by 4.9 per cent.
But the Chinese economy started to bounce back in the second half of the year after recording a contraction of just 1.6 per cent in the first half of the year compared with the same period in 2019.
By September, the Organisation for Economic Cooperation and Development predicted that it would be the only Group of 20 country to record positive growth for the year.
That projection was echoed by the IMF, which forecast in October that China would grow by 1.9 per cent.
In the third quarter the country recorded 4.9 per cent growth and the fourth quarter figure is widely expected to be higher than that.
Other positive signs came in November’s export figures, which were up 21.1 per cent compared with a year earlier – the biggest haul in US dollar terms on record – as the rest of the world turned to Chinese factories to produce the goods they could not.
In the US, the economy expanded by an annualised 33.4 per cent in the third quarter, fuelled by more than US$3 trillion in government economic relief, following a record 31.4 per cent plunge in the second quarter.
Economists expect an annualised 3.5 per cent growth rate in the fourth quarter, but the US economy is still expected to contract by 4.3 per cent in 2020 as a whole, according to the IMF’s latest forecast.
As a result of these contrasting recoveries, the Centre for Economics and Business Research now expects China to overtake the United States to become the world’s largest economy in 2028, five years earlier than was previously predicted.
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