Outbreaks Break Down Economic Forecasts

China’s economy is facing its largest Covid-19 outbreak since the start of the pandemic. The covid cases that were once in the few dozens have risen to 5,100 daily cases as of today. Compared to the West, the numbers seem minuscule but after working tirelessly to prevent mass infection, the country has begun locking down to combat the breakouts.

It is reported that 37 million citizens are currently locked down. Reports are stating that the Omicron variant is the disease seen during this outbreak and has outpaced the Delta variant as the most infectious in the country, making up “80% of recent cases, Wu told the Global Times.” The Chinese stock markets have continued their plunge following the lockdowns and new Covid outbreaks. Its Hang Seng index fell 6% on Tuesday, its lowest close in six years. With China being the world’s second-biggest economy, these lockdowns have effects on other countries. “There are already growing expectations that China’s 2022 growth could come in at zero percent, sharply below the government’s 5.5% target. Morgan Stanley recently cut their forecast for China’s economic growth for 2022 to a 5.1% gain for the gross domestic product — down from 5.3% previously. There could be shockwaves across global supply chains, at a time when the world is attempting to get back up to speed post-pandemic.” Supply chains are the most worrisome part of the lockdown as the US alongside other countries have faced immense pain from these constraints. “The risk here is whether COVID will be found at Yantian Port,” said Iris Pang, chief China economist for ING. “If the port has to be suspended, it will affect a lot of electronic imports and exports.” These shutdowns are also affecting automakers like Volkswagen, Toyota, and General Motors. 

Yum China has fallen victim to the outbreak as well. The company claims its sales have been hurt by the outbreaks. “Our operations are significantly impacted by the latest outbreaks and the tighter public health measures which resulted in a further reduction of social activities, traveling and consumption,” Yum China, which operates Pizza Hut and KFC in the country. ”At this moment, policymakers are clearly putting COVID-zero ahead of growth.”

It seems as though it continues to be one thing after the other. Covid, inflation, war, and now covid lockdowns when our economy is just about to get back into gear. With our products relying on trade and imports from China, it is worrisome for the US economy moving forward and rising costs may continue.