BENGALURU- The impact of the coronavirus outbreak in China on US economic growth will be negligible and short-lived, according to economists in a Reuters poll who nonetheless now say risks to their forecasts are skewed more to the downside.
The outbreak has also significantly increased the chance Beijing doesn’t comply with all of the terms of a Jan. 15 initial trade agreement signed with Washington, potentially reigniting a damaging trade war between the world’s two largest economies.
Still, medians from the Feb. 10-19 Reuters poll of over 100 economic forecasters found the overall US economic growth outlook for this year unchanged compared with last month.
The forecast for growth in the current quarter was reduced just 0.1 percentage point to a seasonally adjusted annualized rate of 1.5 percent – already slow, even by recent standards. The economy was then expected to grow 1.8-2.0 percent each quarter until end-2021.
“At this point, we are assuming the coronavirus impact will be relatively small, and more importantly, temporary. So whatever drag there is in the first quarter will largely be reversed in the second,” said Jim O’Sullivan, chief US macro strategist at TD Securities.
“It will not have a significant impact on the US economy. But that is certainly a risk for sure. I mean, that is the source to downside risk if it keeps escalating.”
Growth is expected to pick up to 1.8 percent in the second quarter of this year, only slightly slower than the 1.9 percent forecast in the January poll.
In that survey, which was conducted before the World Health Organization declared the coronavirus a global public health emergency, 56 percent of economists said the risks to their US growth views were more to the upside.
However, as the outbreak spread, that has switched around to nearly 70 percent, or 33 of 48 respondents now saying the opposite. Around 75,000 people have been reported as carriers of the virus globally, with over 2,000 confirmed dead.
Despite these risks, the likelihood of a US recession in the coming year only edged up to a median 23 percent from 20 percent in January. — Reuters
