NEW YORK/SHANGHAI -- With the coronavirus outbreak disrupting factories and transportation in China, speculation is mounting that the government will have to set its sights lower when announcing the economic growth target next month.
Goldman Sachs sees the epidemic reducing first-quarter growth in Chinese gross domestic product by 1.6 percentage points in year-over-year terms, its Asia economics team said in a report Monday.
Judging by such past viral outbreaks as severe acute respiratory syndrome, the weakness will likely be concentrated largely in such service industries as transportation, accommodations, wholesale trade and retail trade, the American investment bank predicted.
Global repercussions will include reduced exports to China and lower spending by Chinese tourists abroad, wrote the Goldman analysts, who noted that "several Asian countries are now particularly exposed to China."
"As a result, our Asia team has cut its growth forecast in Thailand due to its tourism exposure and has signaled downside risk" in South Korea and Taiwan due to their trade exposure, they added.
But with China and others now moving aggressively to contain the outbreak, Goldman sees the rate of new infections down sharply by quarter's end and only "a modest hit" of 0.1 to 0.2 point to the global economy for the full year.
British research firm Oxford Economics has cut its forecast of Chinese first-quarter GDP growth by more than 2 points. Even with a rebound in the second quarter, "we now forecast 5.4% growth for 2020, compared with 6% previously," it said.
These will likely factor in when Premier Li Keqiang reveals the economic growth target in a government work report in early March at the annual gathering of the National People's Congress, the nation's parliament.
This year's expected target of "around 6%" is slower than the range of 6% to 6.5% targeted for 2019.
A senior government official touched on the expected impact Monday.
"The impact on the economy, especially on consumption, is growing larger," said Lian Weiliang, deputy head of the National Development and Reform Commission, China's main macroeconomic policy organ, of the coronavirus in a news conference.
Transportation, culture and tourism, hotels and dining, and movies and entertainment have sustained severe blows from the outbreak, Lian said.
But he expressed the view that the economic fallout will be lighter than that from SARS.
"China's current economic strength, resources and abilities to deal with emergencies have significantly strengthened since that time, and we are fully confident in and capable of winning the battle against the epidemic," Lian said.
The negative impact of SARS was mostly contained in the spring of 2003. China's real GDP that year grew 9.1% during the second quarter compared with a year earlier, or 2 points slower than the first-quarter growth.
But private-sector economists expect the new virus to have greater economic consequences than SARS did.
China has a larger global footprint than before. It now accounts for 20% of the global GDP, based on purchasing power, up from 8% in 2003.
China also has a larger share of the world's trade. Its demand for petroleum and its travel expenditures have grown as well.
In addition, China's share of total global debt has ballooned to 20% from 3%. Many Chinese enterprises are dependent on leverage. An economic slowdown or a shock to corporate earnings would put the sustainability of a large swath of businesses in question.
Nonfinancial Chinese enterprises are on the hook for $420 billion in corporate bond redemptions in 2020, according to Refinitiv data as of December 2019.
The figure will reach nearly $630 billion in 2021 and $570 billion in 2022. So more than $1.6 trillion in bonds will have to be repaid over three years, up 50% from the 2017-19 amount.