ING Bank released an analysis on April 7 to estimate the cost of China’s latest clampdown against Covid, notably in Shanghai.
This financial hub will suffer a 6% GDP loss if the current lockdowns persist until the end of April only. The whole nation could incur a 2% GDP loss.
The bank also revised China’s GDP growth rate. After considering the timing of relief measures, ING downgraded the figure from 5% year on year to 4% year on year for the second quarter of 2022.
2022 GDP growth is adjusted to 4.6% from 4.8%.
The report assumed that Shanghai would record positive cases in most of its areas and virus testing would continue for most of the month; as a result, most economic activities would stop, and factories would hardly function normally.
Regarding office work, especially for employees in the financial sector, there should be no problem as most of them can work from home.
However, it is uncertain if they could keep the usual working routine in isolated facilities with poor internet connection.
Moreover, under China’s strict zero-tolerance COVID measures, infected workers and their close contacts at office may affect the entire working force of a company, leaving operations suspended to prevent mass infection.
The reporting bank expects the government, both locally and nationally, to deliver some relief and stimulus measures. These measures would be around 1% to 1.5% of GDP. The bank added that the timing of these measures is crucial.
ING also anticipated the People’s Bank of China to cut the interest rate by 20 bps (basic points) and the Reserve Requirement Ratio by 50 bps for small and medium enterprises in the second quarter of 2022.