Photo: IC

Unprecedented economic damage caused by the spread of the coronavirus worldwide has prompted substantial cuts by various financial institutions to their 2020 global growth forecasts, underlining the fact that the virus' impact on the global economy is much more severe than previously expected.

The same is true of growth forecasts for the Chinese economy despite the epidemic stabilizing in China, with workers back to factories and businesses reopening. Following the release of worse-than-expected data on China's economic activities in the first two months of this year, a number of global institutions slashed their growth projections for China to below 5 percent for 2020.

Standard Chartered has pared its 2020 growth outlook for China down to 4 percent from a previous 5.5 percent, citing the sharp contraction in the Chinese economy during the first quarter and the growing risk of a global recession. The latest UBS report claimed that even with more policy support, the country's annual growth will still likely drop to 1.5 percent in 2020. UBS previously forecast China's annual growth rate at 4.8 percent.

These significant downward revisions to GDP forecasts in China are made based on the inevitable fact that the deteriorating global economy will hamper China's recovery. Deutsche Bank economists said in a recent report that the coronavirus will lead to the most severe global recession since the World War II.

If anything, these updated growth forecasts may serve as a reminder that China will face greater difficulties in reviving its economy due to the longer period of economic disruption and weaker global demand due to the worldwide spread of the virus. And there is a need for China to adjust its economic goals based on new developments.

In the early days of the outbreak in China, we believed it was essential for the nation to stick to a 6 percent growth target to strengthen confidence, but now that the rest of the world is reeling from the pandemic, production resumption in China alone cannot make up for the damage to global supply chains, and cannot bring its economic activities back to complete normalcy. Acknowledging the reality, it is now necessary for China to ensure the country's economy to gain by at least 5 percent this year.

All-out efforts are needed from both central and local authorities to boost the economy. Specifically, as trade is expected to face great pressure this year, it is imperative for China to focus on expanding its domestic consumption, which will be the main engine for this year's economic growth. Further policy stimulus to promote consumption should be issued to cultivate a strong domestic market, while preparations for the worst are still necessary. After all, as shown by the global spread, tests brought by the virus are unprecedented and unexpected.