Double shock | Covid and war jeopardising global economic recovery 4/07/2022
U.S. GDP growth, quarterly (annualised) 40
33.8
30 20 10
4.5
6.3
6.9
6.7 2.3
0 -1.5 -10
-5.1
-20 -30 -31.2 -40 Q1
Q2
Q3
Q4
Q1
Q2
2020
Q3 2021
Q4
Q1 2022
Source: Bureau for Economic Analysis
China: Growth and supply chains under pressure Following a relatively strong performance by the Chinese economy in 2021 with a growth rate of 8.1 percent compared to the relatively low basis value from 2020, expectations for 2022 have had to be pulled down. Zero-Covid strategy restraining economic growth While restrictions imposed to stem the spread of the pandemic are being lifted or reduced all over the world and the situation appears to be easing off, the Chinese government is sticking fast to its zeroCovid strategy. Strict lockdowns were imposed on several cities and regions in response to recent outbreaks of infections, above all in April and May. Production, consumption, supply chains and logistics have all suffered sustained damage. The economic indicators for these months are therefore correspondingly poor. The impact of these lockdowns has rippled across with world with effects being felt slightly later down the line in terms of time and beyond China’s borders. In Europe, the lockdowns have led to supply delays, scarce availability of certain goods and higher prices. The Chinese economy started out the year with unexpectedly strong growth of 4.8 percent, buoyed by an upturn in industry and exports in January and February. The second quarter figures will show a pronounced slump in growth. The poor performance in March, April and May will have a prolonged effect on overall growth. The ambitious growth targeted by the Chinese government of around 5.5 percent is well-nigh out of reach even with massive economic stimulus and infrastructure measures. If the situation remains relatively stable for the rest of the year, annual growth could reach between 3.5 and four percent. In the case of more lockdowns or other economic shocks, growth could also well drop to below three percent.
20
