China economic growth forecasts cut as record Covid-19 infections darken outlook

2 weeks ago 29

BEIJING - The outlook for the world’s second largest economy is darkening as China reports record high Covid-19 infections and sends cities nationwide under localised lockdowns, mass testing and other curbs.

The likely delayed Covid Zero reopening may shave almost one percentage point off China’s gross domestic product growth next year, according to Oxford Economics.

If China pushes back its economic reopening to the first half of 2024, an anticipated recovery in private consumption will be delayed, Oxford Economics’ senior economist Louise Loo wrote in a Friday report. That may knock almost a full percentage point off the firm’s projected growth forecast of 4.2 per cent for 2023.

“Risks to our near-term macro outlook have clearly tilted to the downside,” Ms Loo said in the report, referring to the negative economic impact from surging Covid cases in recent weeks that have led to broadening lockdown measures across the country. The firm currently expects a broad reopening to take place in the second half of next year.

China announced earlier this month measures to optimise Covid controls, raising hopes that authorities were taking more action to reduce economic damage from the curbs before a gradual reopening next year. However, recent spikes in cases have led many places to revert to their old playbook of restrictions. That’s left major cities including Beijing and Guangzhou at a standstill and hurt optimism over reopening.

Nomura Holdings on Thursday lowered its forecasts for China’s economic growth for this year and next, citing a “slow, costly and bumpy” reopening of the country as Covid cases surge.

This year’s estimate was cut slightly to 2.8 per cent from 2.9 per cent, while next year’s projection was lowered to 4 per cent, from 4.3 per cent. The forecasts are below the median estimates of 3.3 per cent, for 2022 and 4.8 per cent, for 2023 in a Bloomberg survey of economists. 

China’s reopening next year could be “back and forth” as officials may backtrack if Covid cases skyrocket, Nomura said. The investment bank&...

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