JPMorgan expected that China’s economy could shrink to 1 percent and possibly crash to -4 percent if the coronavirus threat is not contained in time.
JPMorgan economists, led by Joseph Lupton wrote that as the outbreak continues, they have made significant revisions on their activity forecasts for China, with knock-on effects across the globe.
The virus, which originated in China’s Hubei province in December, has claimed more than 2,440 lives and infected more than 77,000 people.
Wall Street’s attention has over the last few weeks shifted from the coronavirus in China and internationally, to estimating the economic fallout caused by the virus.
Some experts believe that the virus will peak around March at around 85,000 cases, according to Barrons.
Goldman Sachs also expects the virus to shave as much as 2 percent from Global GDP in the first quarter of this year, as a result of China’s GDP growth sliding to 4 percent.
The virus is expected to cripple supply chains and collapse Chinese tourism and trade. The effects on China will likely impact the whole world.
JPMorgan wrote that its Q1 growth forecasts “now stand more than 5 percent pts lower than our pre-outbreak forecasts”, adding that it anticipates larger swings in industrial production from the ongoing factory shutdowns.
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Retail sales in China are expected to go through the same collapse in Q1 with a large recovery in Q2 that continues in Q3.
“If we are right, the virus drag should be fading by early March and set the stage for a rebound,” JPM concluded.