China’s coronavirus outbreak is the most significant since the SARS crisis in 2003, and the impact on the economy is likely to be larger this year given the measures authorities have implemented to reduce regular population flows, which could slow migrant workers returning to their jobs after the Chinese New Year holiday. State television late Sunday night also claimed the holiday might be extended to help contain the disease.
Q1 and Q2 2020 GDP growth will be impacted and will probably slow below 6%, but in the past, these episodes have also produced strong rebounds after activity normalizes. Major services industries, from transportation and tourism to films and restaurants and catering, are expected to suffer most significantly from measures designed to control the disease. The yuan may also come under pressure from risk aversion and additional PBOC easing steps to offset the effects of the crisis.
