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(Bloomberg) — Economists at Nomura Holdings (NYSE:NMR) Ltd. and China International Capital Corp. cut their growth forecasts for China’s economy as electricity shortages force businesses to cut back on production.

The power cuts will likely slash the country’s growth rate by 0.1 to 0.15 percentage point in the third and fourth quarters, CICC economists said in a report. The power supply shock will have a large impact on short-term production, especially in September, with industrial output growth in the month likely dropping to 4%-4.5%, they wrote.

Read More: China Power Crunch Is Next Economic Shock Beyond Evergrande 

The stringent measures to cut electricity use in economic powerhouses like Jiangsu, Zhejiang and Guangdong provinces will probably cause the purchasing managers index, scheduled for release later this week, to drop below 50, Nomura said in a report Monday. Its economists had already cut their quarterly growth forecasts last Friday and lowered their full-year estimate to 7.7% from 8.2%, and now see a possibility of lowering the forecasts further due to the power shortages. 

“Even with these cuts, we see more downside risk to our forecasts,” Nomura’s Chief China Economist Lu Ting said in a note. “We expect markets to downwardly adjust their forecasts soon.”

CICC also sees an impact on inflation, with producer prices likely to rise at least 9% in 2021 from a year earlier, weighing on the profitability of downstream firms. Monetary policy will likely stay neutral with an easing bias, CICC economists said.

In a separate report, CICC upgraded their full-year 2021 projection for export growth to 25.7% from 18.4%, citing robust orders. About 30%-40% of orders are diverted from other exporter countries hit by the virus, it said.

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