Economic and financial risk insights - Watch for spill-overs from China growth and supply chain disruptions

Global growth remains subdued even though some headwinds are fading (manufacturing indicators bottoming out, "phase 1" agreement signed). The risk of a hard landing in China has increased due to the severe disruptions caused by the coronavirus. Global spillovers could be substantial. Long-term yields will remain low globally and central banks are expected to remain very accommodative

Key takeaways

  • We estimate that the coronavirus outbreak will lower Chinese Q1 growth by at least 2 ppt and by 0.5 ppt for full-year 2020 (to 5.4%)
  • Global 2020 growth is reduced by 0.2 ppt
  • The spill-overs to other economies will be largest in the Asia region
  • Spill-overs to the global economy could become significant if the virus outbreak lasts longer than currently expected
  • Immediate headwinds from trade war and manufacturing are fading after the US and China have signed the "phase 1" agreement and with signs of stabilisation in manufacturing
  • We are lowering our 2020 growth forecast for the Euro area by 0.1 ppt to 0.8%
  • As growth in the UK remains subdued post Brexit and inflation below target, we now expect the BoE to cut rates this year

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Economic outlook Watch for spill-overs from China growth and supply chain disruptions

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See also former Economic Outlooks