23/04/2020
BENGALURU (Reuters) – The Indian economy is likely to suffer its worst quarter since the mid-1990s, hit by the ongoing lockdown imposed to stem the spread of coronavirus, according to a Reuters poll, which predicted a mild and gradual recovery.
Over 2.6 million people tmsnrt.rs/3aIRuz7 have been infected by the coronavirus worldwide and more than 180,000 have died. Business and household lockdowns have disrupted supply chains globally, bringing growth to a halt.
The April 17-22 Reuters poll predicted the economy expanded at an annual pace of 3.0% last quarter but will shrink 5.2% in the three months ending in June, far weaker than expectations in a poll published last month for 4.0% and 2.0% growth, respectively.
The predicted contraction would be the first – under any gross domestic product calculation, which has changed a few times – since the mid-1990s, when official reporting for quarterly data began.
“The extended lockdown until early May adds further downside risk to our view of a 5% year-on-year GDP fall in the current quarter, the worst in the last few decades,” said Prakash Sakpal, Asia economist at ING.
“We don’t consider economic stimulus as strong enough to position the economy for a speedy recovery once the pandemic ends,” he said.
(Graphic: Reuters poll graphic on coronavirus impact on the Indian economy IMAGE link: here)
The Indian government announced a spending package of 1.7 trillion rupees in March to cushion the economy from the initial lockdown, which has been extended until May 3.
In an emergency meeting last week, the Reserve Bank of India cut its deposit rate again, after reducing it on March 27 and lowering the main policy rate by 75 basis points. It also announced another round of targeted long-term repo operations to ease liquidity.
But even with those measures, 40% of economists, or 13 of 32 – who provided quarterly figures – predicted an outright recession this year. Only one had expected a recession last month.
In the worst case, a smaller sample of respondents predicted, the economy would contract 9.3% in the current quarter. That compares with 0.5% growth in the previous poll’s worst-case forecast in late March, underscoring how rapidly the outlook has deteriorated.
The latest poll’s consensus view still shows the economy recovering again slowly in the July-September quarter, growing 0.8%, then 4.2% in October-December and 6.0% in the final quarter of the fiscal year, in early 2021.
But that compares with considerably more optimistic near-term forecasts of 3.3%, 5.0% and 5.6%, respectively, in the previous poll.
“A rebound in economic activity following the disruption is expected, but the low starting point of growth implies a gradual recovery,” said Upasana Chachra, chief India economist at Morgan Stanley.
“Indeed, before disruptions related to COVID-19, growth was slowing, with domestic issues of risk aversion in financial sector … (and) those concerns will likely stay after the COVID-19 disruptions have passed unless the policy response is much larger than expected,” she said.
The unemployment rate has tripled to 23.8% since the lockdown started on March 25, according to the Centre for Monitoring Indian Economy, a Mumbai-based research firm.
The Indian economy was now forecast to expand 1.5% in the fiscal year ending on March 31, 2021 – the weakest since 1991 and significantly lower than 3.6% predicted in late March. It probably grew 4.6% in the fiscal year that just ended.
Under a worst-case scenario, the median showed the economy shrinking 1.0% this fiscal year. That would be the first officially reported economic contraction for a 12-month period since GDP was reported to have contracted for calendar year 1979.
“Unless fiscal policy is also loosened aggressively alongside monetary policy, there is a big risk the drastic economic slowdown currently underway morphs into an annual contraction in output and that the recovery is hampered,” said Shilan Shah, senior India economist at Capital Economics.
All 37 economists who answered a separate question unanimously said the RBI would follow up with more easing, including lowering the repo and reverse repo rates and expanding the new long-term loans programme.
The RBI was expected to cut its repo rate by another 40 basis points to 4.00% by the end of this quarter. Already lowered twice over the past month by a cumulative 115 basis points, the reverse repo rate was forecast to be trimmed by another 25 points by end-June to 3.50%.
Source: Reuters
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29/03/2020
- Chinese president is fighting ‘two tough battles’ to reboot industry and defeat Covid-19, Xinhua says
- Choice of industrial powerhouse for official visit shows the importance Xi gives to reviving the economy, observers say
Chinese President Xi Jinping chats to workers and officials at Ningbo port in east China on Sunday. Photo: Xinhua
visited the industrial powerhouse of Zhejiang province on Sunday in a move state media described as a clear message the country was ready to get the economy back on track amid the “new normal” of dealing with the coronavirus.
The trip, to Ningbo – one of the world’s busiest ports and a trade hub for eastern China – was Xi’s first outside Beijing since he visited Wuhan, the initial epicentre of the Covid-19 outbreak, earlier in the month.
As well as a visiting the port, he spoke to workers at an industrial zone for car part manufacturers, where he learned about the latest efforts to restart production, Xinhua said in a brief report.
The visit came after two months of almost total lockdown in many parts of the country that disrupted businesses, transport and people’s daily lives, and ground the economy to a near standstill.
While local transmissions of the coronavirus in China appear to be under control, Beijing has implemented strict measures to prevent imported cases, including slashing international flights and banning most foreigners from entering the country.
In a separate report, Xinhua said Xi’s visit sent “a clear message” that China was resuming its industrial production and social activities, and described the fight against the coronavirus as the “new normal”.
Reviving the economy and battling a deadly disease were Xi’s “two tough battles”, it said.
Xi’s choice of destination was a clear message that restarting the economy is a top priority. Photo: Xinhua
Zhejiang is something of a power base for Xi, who spent nearly five years there during his climb through the ranks of the Communist Party.
One of the country’s biggest trading hubs, the province generated 3 trillion yuan (US$423.2 billion) in foreign trade last year, or more than 13 per cent of the national total, according to official figures.
“It’s a highly export-oriented economy … which has made it crucial not only to China’s development plan but also to safeguarding the stability of the global supply chain,” Xinhua said.
Observers said Xi’s visit was evidence of Beijing’s determination to get the economy back up and running as soon as possible.
Zhao Xijun, an economics professor at Renmin University, said Ningbo was a key part of the export economy and a base for many local and foreign entrepreneurs.
“It is a clear signal that China, after getting domestic infections under control, is now prioritising economic growth,” he said.
“It also shows the country will keep developing its economy and opening up its markets.”
But hopes of a quick recovery for the Chinese economy have been dashed by the spread of the coronavirus across Europe and the United States, causing a sharp decline in demand for Chinese goods.
Xi spent five years in Zhejiang while climbing the ranks of the Communist Party. Photo: Xinhua
In a meeting on Friday, the Communist Party’s Politburo said it would step up macroeconomic policy adjustments and pursue a more proactive fiscal policy while optimising measures to control the coronavirus to speed up the restoration of production, doing whatever it could to “minimise the losses caused by the epidemic”.
“China has successfully reopened much of its economy from the extremes of the coronavirus lockdown, but now faces a new problem: an impending collapse in demand for its exports as its customers go into lockdowns of their own,” Gavekal Dragnomics said in a research report.
“That shock to industry and manufacturing employment means that China will not enjoy the hoped-for V-shaped recovery in growth.”
Source: SCMP
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18/03/2020
BEIJING (Reuters) – China’s Tencent Holdings Ltd (0700.HK) said on Thursday the coronavirus drove 8 billion visits to its WeChat platform as users flocked to get “health codes” they need to show authorities in order to travel around the country.
Reporting slightly lower than expected fourth quarter profit on Wednesday, the gaming and social media giant said in a statement it did not expect the epidemic to have any significant impact on its financial position to date.
This is markedly different from many companies around the world which have downgraded earnings forecasts due to the virus.
It reported a 21.58 billion yuan (US$3.07 billion) profit for the three months through December. That compared with the 22.85 billion yuan average of 15 analyst estimates compiled by Refinitiv.
Revenue rose 25% to 105.8 billion yuan, versus the 102.9 billion yuan average estimate of 17 analysts. That marked Tencent’s fastest revenue growth since late 2018.
Tencent’s businesses are mainly online-only, positioning it uniquely against other tech giants such as Alibaba Group Holding Ltd (BABA.N) that focus on e-commerce and whose supply chains have been severely disrupted by the outbreak.
“Mobile games are one of the very few entertainment options during the coronavirus outbreak. Comparing the figures in early 2019, downloads of Tencent games increased by 10.4% year over year in this February, and revenue increased by 11.8%,” said analyst Nan Lu at researcher Sensor Tower.
Overall, downloads of all Tencent apps for this February grew 32.3% month-on-month and 42.9% year-on-year, she said.
VIDEO STREAMING
Tencent’s most popular games include Honour of Kings and Peacekeeper Elite. It also operates social media platform WeChat, a video streaming site and a news portal. Its services experienced a surge in traffic as China’s government urged millions of people to stay at home and away from crowded places, analysts said.
Well before the epidemic began in China in late December, prospects were already starting to look up for the company after an especially difficult 2018, when it endured a lengthy freeze in the regulatory approval of new games that wiped billions of dollars off its market value.
A weak point in the January-March quarter, however, will likely be advertising – which made up nearly 20% of revenue in the third quarter – as companies cut back spending amid concerns over the virus’ economic fallout, analysts said.
Shares in Tencent closed 4.5% lower on Wednesday. Tencent’s shares have fallen 11.1% so far this year as the coronavrius roiled global markets, versus a 21% decline in the Hang Seng index .HIS.
Subsidiary Tencent Music Entertainment Group (TME.N) on Tuesday said it would likely see “much softer” first-quarter revenue growth as the outbreak was impacting licensing and advertising revenue.
On the flip side, analyst Kevin Tam at Core Pacific-Yamaichi Securities in Hong Kong wrote in a research note that Tencent could see margin improvement “as a result of stringent control on marketing expenses and higher profitability from video advertising”.
Source: Reuters
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07/02/2020
- Some companies polled by Shanghai’s American Chamber of Commerce said they were speeding up plans to move operations out of mainland
- Transport bans and strict public health measures have disrupted economic activity
China’s economic growth may drop to 5 per cent or lower because of the outbreak, according to a government economist. Photo: Bloomberg
The majority of US firms with operations in China expect
a virus outbreak
to cut revenue this year, and some are accelerating plans to shift their supply chains out of the country, according to a poll by Shanghai’s American Chamber of Commerce.
Nearly a quarter of the firms forecast revenue would fall by at least 16 per cent this year due to the outbreak, while over a fifth said it would decline by 11-15 per cent. Only 13 per cent of respondents said revenue would see very little or no impact from the virus.
The survey covered 127 companies, including 20 with China-sourced revenues of over US$500 million and 27 with China revenues of US$100 million to US$500 million.
Sixteen per cent of respondents expected China’s gross domestic product to fall by more than 2 per cent due to the outbreak.
China tries to get back to work amid coronavirus outbreak
The death toll from the virus in China has topped 600, with more than 31,000 people infected. Widespread transport bans and strict public health measures have disrupted economic activity in much of the country, and factory closures are starting to ripple through global supply chains.
China faces dilemma as it tries to get back to work amid coronavirus outbreak fears
A government economist said last week that China’s economic growth may drop to 5 per cent or even lower due to the outbreak, possibly pushing policymakers into introducing more stimulus measures.
Sources said Chinese policymakers were preparing measures, including more fiscal spending and interest rate cuts, amid expectations the outbreak would have a devastating impact on first-quarter growth.
In response to the virus, some survey respondents said they were shifting operations out of China and moving more production to other areas, including India.
“Not innovative, but our suppliers are moving operations to Taiwan. This has been considered before, options and planning were being made, but they are pulling the trigger now,” according to one respondent in the survey.
“Our company will directly source from Taiwan and eliminate the mainland China supply chain for more and more products.”
Source: SCMP
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