Demonstrating the economic impact of the coronavirus pandemic, China’s economy contracted at an annualised rate of 6.8% during the first quarter of 2020, compared with growth of 6.4% in the same period last year.
- The IMF expects emerging market economies to shrink by 1% in 2020
- China’s economic data remained weak in March
- Chinese export orders fell sharply
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Demonstrating the economic impact of the coronavirus pandemic, China’s economy contracted at an annualised rate of 6.8% during the first quarter of 2020, compared with growth of 6.4% in the same period last year. Having contracted in the first quarter, investors are likely to watch China’s progress closely during the second quarter. While the International Monetary Fund (IMF) has predicted that emerging markets and developing economies will contract by 1% this year, rebounding to grow by 6.6% next year, it expects China to achieve growth of 1.2% in 2020 and 9.2% in 2021.
“The World Bank expects Brazil’s economy to contract by 5% in 2020”
China’s exports fell at an annualised rate of 6.6% during March, while imports fell by 0.9%. In comparison, exports decreased by 17.2% year on year over January and February combined and imports declined by 4%. Industrial production dropped at an annualised rate of 1.1% in March, compared with a decline of 13.5% over the first two months of the year. Meanwhile, retail sales fell by 15.8% year on year over March, having fallen by 20.5% during January and February.
After stabilising in March, China’s manufacturing activity relapsed during April as export orders posted a sharp drop, falling at their steepest pace since December 2008. According to the Caixin/Markit purchasing managers’ index (PMI), business confidence also declined, falling to a four-month low. The Shanghai Composite Index rose by 4% during April, but fell by 6.2% over the year to date.
Brazil has more cases of coronavirus than any other country in the Americas, apart from the US, according to the World Health Organisation (WHO), which confirmed 71,886 cases in Brazil by the end of April, with 5,017 deaths recorded. The World Bank expects Brazil’s economy to contract by 5% in 2020; the country faces three major shocks: weak global demand, low oil prices – Brazil is a net exporter of oil – and the economic disruption from domestic virus-containment. Although Brazil’s government and central bank have stepped up measures to address the impact of the virus, the World Bank warned that risks to the downside are “significant”.
Amid mounting expectations of a cut in the key Selic interest rate when central bank policymakers meet in May, Brazil’s currency continued to weaken over April. The Bovespa Index rose by 10.3% during the month but has fallen by 30.4% since the start of the year.
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