Global investment bank Nomura cut its Chinese GDP forecast against on the latest wave of Covid lockdowns.
The lockdown of Sichuan Province capital Chengdu last week sent fears for production surging as the 21 million population joined a continued shutdown for tech hub Shenzhen.
Nomura confirmed approximately 12% of China’s GDP was currently impacted by Covid measures, representing a sharp rise from 5.3% last week.
Nomura used a new model which weights the GDP of affected regions by how tight the Covid measures are.
According to the investment bank’s report, the country’s GDP is now forecast down to 2.7% compared to previous expectations of 2.8% announced in August.
“Back [on Aug. 17], when we cut our Q3 and Q4 GDP growth forecasts, we did not expect growth to worsen at such a pace,” said Nomura chief China economist Ting Lu.
Nomura has often led the pack in cutting estimates for the country before other investment banks, however institutes across the board have been reducing projections for China repeatedly over the last several months.
Nomura currently has the lowest forecast for China among its contemporaries.
The bank said its new model demonstrated China’s GDP was rapidly approaching levels seen over the Shanghai lockdown in April and May, at which time the weighted impact on GDP was slightly above 20%.
“What is becoming increasingly concerning is that Covid hotspots are continuing to shift away from several remote regions and cities – with seemingly less economic significance to the country – to provinces that matter much more to China’s national economy,” said Nomura analysts.