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UBS: China as «Best Case Template» for Recovery

According to a UBS investment note, China can «provide the best case template of what might come next once the pandemic is under control», underlining economic activity observed in the early recovery stages. The bank said there was «pockets of strong pent-up demand» in areas like smartphones, luxury, autos and real estate but noted that offline services like leisure, entertainment and transportation would be hard to immediately resume activity.

«Everyone in the world will look at China to see how to do it,» UBS said, suggesting potential V-shaped recovery in some areas such as auto sales. 

Globally, the bank expects the recovery to remain slow, forecasting Europe to reopen its economy in mid-May and the U.S. in early June, adding that this was still highly dependent on obtaining a medical solution. The bank expects economic recovery to «normalize sustainably» only beginning in the end of 2020.

Pictet: Same Annual Forecast, Different Path

At Pictet, the 6.8 percent contraction was lower than the bank’s original forecast but it kept its annual forecast unrevised, citing continued difficulties in the path to recovery as evidenced by signs in the service sector.

«While our 2020 GDP forecast for China remains unchanged at 1.2%, the growth trajectory has been adjusted to reflect the latest developments,» Pictet said in a commentary by a team of economists. 

The Swiss pure-play expects double-digit GDP contractions in both Q1 and Q2 from western economies, leading expectations of a «deep, asymmetrical U-shaped recovery» – a recovery that will be significantly slower than the collapse. Although the bank did to revise its China GDP forecast, it made a major revision to its global economic forecast for 2020 from minus 0.4 percent to minus 4.1 percent.

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