China itself is getting caught in the trap of creating trouble for others. There a new wave of Corona is wreaking havoc. Shanghai has been in lockdown for several days. It is being told that food items are not reaching the people. Inflation has increased a lot. Inflation jumped higher than expected in March. China is the second largest economy in the world.
PPI reached 8.3 percent
The Producer Price Index (PPI) in China rose to 8.3 per cent in March. In this, there is a big hand in the supply problem and the rise in energy prices. One after the other lockdowns and the Ukraine Crisis have had an impact on the prices. Although the PPI is lower than in February, it is still higher than the economists’ estimates. In March, activities in the services sector saw the biggest decline in two years.
Read also: How dangerous is the XE variant of COVID, NTAGI chief gave this answer
Production decreased due to lockdown
The Consumer Price Index, which shows the inflation of the prices of everyday goods and services, has reached 1.5 percent in March. It was 0.9 per cent in February. Experts say that the lockdown has had an impact on production activities. The government is adopting strict measures to control the new wave of corona. On Sunday, 26,411 new cases of infection from Corona were reported. Monday was the third day of lockdown in Shanghai.
Inflation likely to increase in the coming days
Experts have expressed the fear of further increase in inflation in the coming days. He also believes that if the situation does not improve, then China will miss the target of 5.5 percent GDP growth in 2022. Analysts at Nomura say that the new wave of corona will affect the sowing of crops. There is already a supply problem due to the Ukraine Crisis. This will put pressure on food prices in the second half of this year.
Government measures proving ineffective
“Rising food and energy prices will make it difficult for China’s central bank to reduce interest rates,” Nomura said in its report. The Chinese government is taking steps to support the economy. Along with increasing government spending, it has reduced income tax rates for some companies. But, due to Corona, it is not showing much effect.
There may be a big fall in GDP
Iris Pang, Chief Economist (Greater China) at ING said that if the lockdown continues, Shanghai’s economy will fall 6 percent this month. This can reduce the total GDP of China by up to 2 percent.