China’s tough virus curbs mean that economic activity in the third quarter could be close to flat compared with the previous three months, while full-year growth may fall below 8 percent, a top forecaster said.
“My view is that the Chinese economy should slow sharply in the third quarter, mainly due to the virus but also controls on property,” Market Securities LLP chief economist Christophe Barraud said.
Barraud was Bloomberg’s top-ranked forecaster for the Chinese economy last year.
Photo: Bloomberg
Barraud’s prediction of 0.3 percent growth in the period between July and September from the previous three months is below the median estimate of 1.1 percent in a Bloomberg survey of economists.
Barraud is also bearish on China’s growth for this year compared to the market’s median estimate of 8.4 percent.
“It should be close to 8 percent, but with risks tilted to the downside,” he said. “If there is another outbreak in the fourth quarter, forecasts should be adjusted below 8 percent.” The government has set a target of above 6 percent growth for the year.
Barraud’s prediction came after monthly data showed China’s economy slowing sharply last month, with a slump in retail sales and property construction.
China introduced tougher curbs on travel to squash an imported outbreak of the Delta variant of SARS-CoV-2 from late July. While the measures quickly brought the virus under control, a new cluster has developed in southern China this month, suggesting some restrictions will remain and consumers will continue to be cautious.
“Risks are tilted to the downside because China will keep implementing a zero-tolerance policy concerning COVID-19, particularly ahead of the Winter Olympics in February,” Barraud said.
The France-based economist said that one of his favorite indicators of Chinese economic activity at the moment is the daily number of domestic flights.
“It’s the most reliable data to catch the impact of restrictive measures,” he said.
China is scheduled to release third-quarter gross domestic product data on Oct. 18. In the second quarter, GDP rose 7.9 percent from the same period last year, and 1.3 percent from the previous quarter.
Barraud said his forecasting technique involves trying to collect as much data as possible, including from private providers, before constructing a simple model with just five inputs for each predicted economic variable.
Those forecasts are adjusted based on experience and comparison with competitors, he said.
For the remainder of the year, infrastructure investment and fiscal spending are to be key variables indicating the extent to which Beijing is trying to support growth, he said.
The focus could be more on public investment “because everyone is waiting for public support,” he said.
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