GDP Drops 6.8 Percent, China's Economy Experienced Worst Quarter Since 1992
JAKARTA - China officially released its economic data on Friday, April 17. From this data, the Gross Domestic Product (GDP) of the Bamboo Curtain country fell 6.8 percent. The reason is none other than because of the corona virus pandemic or COVID-19.
Reported by Reuters, this decline even exceeded the expectations of analysts who estimated a decline in GDP in the range of 6.5 percent. COVID-19 has forced China to close factories and shopping centers, leaving millions of people out of work.
This is China's first negative growth (contraction) since at least 1992 and is said to be the worst, when the official quarterly GDP records kick off.
China is also trying to make a recovery by means of tax breaks and credits for companies affected by COVID-19. At least, this is considered sufficient to help restart the economy which has been devastated since February 2020.
Still, analysts say China faces an uphill battle to revive economic growth and stop massive layoffs. The reason is, the COVID-19 pandemic is destroying demand from major trading partners, especially when local consumption is declining.
"The first quarter GDP data is still beyond our expectations, reflecting the economic stagnation when the whole society is locked in," said Lu Zhengwei, Shanghai-based chief economist at Industrial Bank.
“During the next phase, the overall lack of demand is a concern. Domestic demand has not fully recovered as consumption related to social gatherings is still prohibited while external demand is likely to be suspended due to the spread of the pandemic, "he added.
According to the National Bureau of Statistics, on a quarter-on-quarter basis, China's GDP fell 9.8 percent in the first three months of this year. This figure is down slightly from the estimate of 9.9 percent. Meanwhile, China's economy in the fourth quarter of the previous year experienced a growth of 1.5 percent.
National Bureau of Statistics spokesman Mao Shengyong said that China's economic performance in the second quarter is expected to be much better than the first quarter.
However, weaker domestic consumption, usually the biggest growth driver, remains a concern, as income slows and the rest of the world falls into recession.
Data shows, China's per capita income in the first quarter of 2020 after adjusting for inflation, fell by 3.9 percent compared to the first quarter of last year.
"We hesitate to think that this is only in the first quarter, as the second quarter will also likely be lower than expected," said Ben Luk, senior multi-asset strategist at State Street Global Markets in Hong Kong.
"To compensate for the weakness in external demand, we will see some policy support from the Chinese government later this month or early May," continued Ben Luk.