China's Covid spike: What we know and don't know about its economic impact

China's latest Covid-19 outbreak could hit first-quarter gross domestic product by at least half of a percentage point, Citi analysts predicted in a report Tuesday. In the last few days, mainland China has seen its worst Covid outbreak since the initial height of the pandemic in early 2020 — when the economy contracted. The latest surge in cases, which stems from the highly transmissible omicron variant, has forced some manufacturing hubs across the country to suspend or limit production.

The most affected regions account for 16.7% of national GDP, according to Citi estimates.

"Economic loss may be real this time," the analysts said. "Jointly considering the spillover effect to other regions, we think the lockdown and tightened quarantine measures this round could potentially deduct ~0.5-0.8 ppt of GDP growth in Q1, assuming no policy responses."

Mainland China reported 1,860 confirmed Covid cases for Tuesday, down from more than 3,500 new cases a day earlier. The country has not reported new deaths, and the number of new cases is still far lower than in other parts of the world, such as Europe.

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