Search ForexCrunch

Strategists at UOB Group assessed the potential impact on the Chinese economy of the outbreak of the Wuhan coronavirus.

Key Quotes

“Our macroeconomic team has assessed the economic impact to China as a result of the Coronavirus outbreak and now see a sharp GDP growth slowdown from +6.0% YoY in 4Q19 to +5.1% YoY in 1Q20. Thereafter, the Chinese economy can expect a gradual growth recovery to +5.6% YoY in 2Q20, +6.2% in 3Q20 and +6.1% YoY in 4Q20. We see moderate weakness for China full year GDP at +5.7% YoY this year, from +6.1% YoY last year.”

“As a result of this anticipated sharp growth slowdown for China over the immediate quarter, we now forecast knee-jerk CNY weakness, lifting USD/CNY to 7.10 across 1Q20. Thereafter, CNY will likely recover in line with the growth recovery, to 7.05 in 2Q20, 7.00 in 3Q20 and 6.90 in 4Q20.”

“Given that Asia’s growth outlook remains tied closely to that of China, the rest of Asia FX can be expected to broadly track this profile of temporary weakness in 1Q20, followed by gradual recovery from 2Q20.”