Economists are becoming increasingly pessimistic about China’s economic outlook for next year, expecting any rebound to be bumpy under Beijing’s Covid Zero strategy and likely disruptions when the country finally reopens.
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(Bloomberg) — Economists are becoming increasingly pessimistic about China’s economic outlook for next year, expecting any rebound to be bumpy under Beijing’s Covid Zero strategy and likely disruptions when the country finally open again
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Nomura Holdings Inc. cut its 2023 growth forecast for China’s gross domestic product to 4.3 percent from 5.1 percent on Friday. Goldman Sachs Group Inc. lowered its outlook earlier this week to 4.5% from 5.3%, while Societe Generale SA estimated on Friday that growth would be below 5% next year.
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The median estimate in the latest Bloomberg survey of economists is for GDP to grow 5.1% in 2023, down from a previous projection of 5.2%. The consensus for this year was also lowered, from 3.5% to 3.4%.
China’s volatile growth pattern this year has shown that the strength of any rebound could quickly evaporate as the government eases restrictions to contain coronavirus outbreaks, sometimes locking down major cities as it did in Shanghai and Chengdu. Even if the government eases the Covid policy, which some economists expect to happen after March next year, a likely increase in infections could disrupt economic activity for some time.
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“The outlook for next year looks unusually unclear,” Nomura economists, including Ting Lu, wrote in a note. If the government decides to reopen after March, once a reshuffle of China’s top leadership is complete, “the potentially high infection rate could make the initial reopening quite slow, painful and bumpy,” they said .
Goldman also predicts that Beijing will stick to its Zero Covid policy until at least the first quarter of 2023, expecting a jump in infections after any easing of restrictions.
READ MORE: Goldman Cuts China Growth Forecast to 2023 as Covid Zero Remains (2)
In addition to the uncertainty of Covid, the country’s battered housing market will remain a major drag on growth, despite recent government support measures. The export boom of recent years is beginning to wane, the threat of capital outflows rises as the US Federal Reserve raises interest rates aggressively and global energy supplies remain at risk due to of the war between Russia and Ukraine.
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Analysts polled by Bloomberg cut their average forecasts for year-on-year GDP growth by at least 30 basis points for each three-month period from the current quarter to June next year.
“The latest developments suggest that growth momentum has faltering again since September amid the worsening Covid situation,” said Aidan Yao, senior economist at AXA Investment Managers. “With Beijing still reluctant to relax aggressively, we have lowered our forecast for the remaining two quarters of this year, leaving full-year growth now at 3%, down from 3.6% previously “.
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- Full-year inflation is expected to remain unchanged at 2.3% for both 2022 and 2023; Producer price growth is expected to ease further to 5% this year, before moderating to 0.8% next year.
- Projections for annual retail sales growth in 2022 were cut by almost a full percentage point to 2%. Sales are likely to rebound to 6.6% in 2023
- Export growth forecasts for the full year were raised slightly from 8.7% to 9%. Import growth projections were cut by more than 1 percentage point for both the third and fourth quarters of this year
