2 sources vanguard for 05 percentage point estimated

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2 Sources: Vanguard (for 0.5-percentage-point estimated drop in China’s economic growth), the International Monetary Fund (for 2020 China economic growth estimate of $15.3 trillion, made in October 2019), and the Federal Reserve Bank of St. Louis (for China-U.S. exchange rate).
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More than one path is possible for China’s economy A couple of scenarios could leave China’s 2020 economic growth in the 5.0%–5.5% range. The more optimistic scenario would be if economic activity, following a peak in the number of confirmed coronavirus cases, returns to normal between late February and mid-March. Even so, we’d expect first-quarter growth to be noticeably affected by the virus, given that manufacturing and consumption largely stood still in February. In this scenario, first-quarter growth would be modest at the best, bringing full-year growth down to the mid-5% range from a reported 6.1% last year. A second, more plausible, path to 2020 growth in the low-5% range is a continuation of mass quarantines and business shutdowns, with economic activity not returning to normal until perhaps early in the second quarter. In this scenario, we’d expect a meaningful decline in economic output from the fourth quarter of 2019 and a sharp, V-shaped recovery afterward. There would be moderate supply-chain disruptions around the globe. A less likely but important scenario to watch for is the “false recovery,” with activity getting back to normal only to be followed by a reemergence of the virus. In this case, output would lag through the first half of the year, the government would enact more aggressive stimulus programs, and full- year Chinese growth would fall into the high-4% range. Global growth would slow by perhaps half a percentage point. China’s 2020 economic path will not be clear for months Vanguard forecasts before and after the coronavirus’s emergence Source: Vanguard. Previous forecast issued in December 2019, as part of our 2020 economic and market outlook, The new age of uncertainty. New scenarios as of February 21, 2020. It’s important to note, Ms. Wang said, our assumption that the virus will stay primarily contained in mainland China. If it spreads more widely outside China, a bigger global slowdown could occur. The coronavirus’s economic consequences outside of China Adam Schickling, a U.S. economist for Vanguard, estimated that $59 billion or more in economic activity outside of China would be lost or at least delayed by virus-related reductions in trade and travel. His estimate reflects the size of the Chinese economy and its links to much of the rest of the world. China now accounts for roughly 18% of global economic activity, including 31% of manufacturing, 12% of exports, and 18% of travel spending.
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