Japan’s economy will grow this quarter at a much slower pace than previously expected as a resurgence in coronavirus infections is hurting the momentum for a recovery, a Reuters poll found.
But analysts forecast growth to speed up toward the year-end as hopes of a spending pickup amid a widening vaccine rollout will allow the economy to shake off the pandemic drag.
The economy was expected to grow an annualized 2.7% in the July-September quarter, according to the Aug. 2-11 poll of around 40 economists. That was much lower than a 4.2% expansion projected last month and 4.8% growth forecast in June.
The government will release a preliminary gross domestic product growth estimate for April-June on Monday, which analysts expected to come in at an annualized 0.5%. That was up a notch from an annualized 0.4% forecast last month, though the quarter-on-quarter growth forecast still came in unchanged at 0.1%.
A spike in Delta variant cases forced Japan to expand its COVID-19 emergency curbs during the Tokyo Olympic Games, as a record surge in cases strained hospitals in parts of the country and the health crisis weighed on spending by households.
“A delay in the recovery of private consumption, especially centered on the service industry, poses a downside risk to the economy,” said Barclays Securities economist Kazuma Maeda.
Japan’s economy dropped an annualized 3.9% in the first quarter and its recovery has lagged other advanced nations as a late vaccine rollout and lacklustre spending on services undermined the momentum.
Over 80% of analysts polled said the likelihood was high that new COVID-19 variants and the recent COVID-19 infection spike would delay the country’s economic recovery, with most of them expecting a delay of about three months.