Resters Poll: China economy to grow 1.3% YoY in 2Q20, grow 5.3% in Q3 (vs. 3.5%; 5.9% in April 14 poll)

Analysts at Reuters have conducted a poll which has resulted in the forecast that the Chinese economy will slowly recover from its first quarterly contraction since current records began.

However, the economists predicted in a Reuters poll warned of a likely recession if conditions worsen again from the global coronavirus pandemic.

Key notes

• The poll found China's gross domestic product (GDP) was expected to grow just 1.3% in the current quarter on a year earlier, after contracting 6.8% in January-March.
• Reflecting the heightened uncertainty, forecasts for second quarter GDP growth ranged from -5.0% to +5.0%, with economists based in mainland China providing all of the more optimistic predictions. The poll of more than 40 economists in mainland China and beyond was taken April 20-22.
• At a time when countries around the world are considering how to ease their lockdowns of businesses and households, China earlier this month lifted its lockdown of Wuhan, where the outbreak began, and announced it would fully restore rail, flight and freight operations by the end of April.
• The Chinese authorities have also allowed factories to resume production and reopen businesses, leading to a recovery in manufacturing activity in March for the first time this year in the world's second-largest economy.
• But while China's economy is starting up again much earlier than major economies in Europe and the United States, which are still struggling with high reported infections and deaths from COVID-19, the outlook has deteriorated significantly with successive downgrades.
• The contraction just recently reported for Q1 was only a few tenths of a percentage point lower than the median 6.5% shrinkage forecast in a Reuters poll published on April 14.
• Under a worst-case scenario, Q2 GDP is forecast to contract 1.0%, according to the median view, which would mean two consecutive quarters of contraction, the textbook definition of a recession used by most economists.

Commodity-FX in focus

Meanwhile, China reports 10 new coronavirus cases in Mainland as of end-April 22 vs 30 a day earlier and commodity currencies are under pressure with AUD/NZD rallying to fresh highs:

• AUD/NZD testing highest levels since November 2019