China’s GDP contracts for the first time in its entire recorded history

China’s economy shrank for the first time since at least 1992 in the first quarter, as the coronavirus epidemic paralyzed production and spending, prompting authorities to do more to stop the losses increasing jobs.

Gross domestic product (GDP) fell 6.8% in January-March from year to year, official data showed Friday, more than the 6.5% drop predicted by analysts in a poll. Reuters and reversing a 6% increase in the fourth quarter of last year. year.

The contraction is also the first in the world’s second largest economy since at least 1992, when official quarterly GDP records began.

While China managed to operate a large part of its economy in February, analysts say policy makers are facing a tough battle to revive growth as the coronavirus pandemic ravages global demand.

Nomura expects Beijing to provide a short-term stimulus package, which could be financed by the central bank through various channels.

“However, unlike previous easing cycles, when most of the new credit was used to finance spending on infrastructure, real estate and consumer durables, this time we expect most new credit will be used for financial relief to help businesses, banks and households survive. The COVID-19 crisis, “they said in a note.

On a quarterly basis, GDP fell 9.8% in the first three months of the year, said the National Bureau of Statistics, right next to expectations of a 9.9% contraction against 1 .5% in the previous quarter.

Separate data showed that China’s industrial production fell 1.1% less than expected in March from the previous year. Retail sales fell 15.8% over the same period. Capital investment decreased by 16.1% in January-March.

The urban unemployment rate in China was 5.9% in March, compared to 6.2% in February.

The pandemic has infected more than 2 million people worldwide and killed more than 130,000 people. China, where the virus first appeared, has reported more than 3,000 deaths, although new infections have declined significantly since their peak.

Analysts are predicting nearly 30 million layoffs this year due to the stuttering of new jobs and falling global demand, exceeding the more than 20 million layoffs during the 2008-2009 financial crisis.

Beijing has pledged to take more measures to combat the impact of the pandemic, as growing job losses threaten social stability.

The central bank has already eased monetary policy to help free up the flow of credit to the economy, but easing has so far been more moderate than during the global financial crisis.

The government will also build on fiscal stimulus to stimulate investment and consumption in infrastructure, which could push the 2020 budget deficit to a record level.

For 2020, China’s economic growth is expected to drop at its slowest annual rate in nearly half a century, a Reuters poll found this week.