China growth forecasts raised for 2023, 2024 as country reopens: Economists’ poll

HONG KONG – Economists raised their economic growth forecasts for China for 2023 and next year after it dropped its Covid-19 restrictions faster than expected, ushering in a recovery, and following a surprisingly resilient performance towards the end of 2022.

The world’s second-largest economy is now forecast to expand 5.1 per cent in 2023 and 5 per cent next year, according to the median estimate in a Bloomberg survey of economists. The projections were higher than the 4.8 per cent and 4.9 per cent respectively in last month’s poll.

China’s abrupt ending of its

three-year-long

zero-Covid policy last month

and the peaking of infections in many places over the past few weeks have fuelled optimism that the costs of reopening would be restricted to a period of holidays when activity is slow traditionally. Consumption is widely expected to rebound after infection waves ebb and be a key driver of growth.

Main economic indicators published by the government earlier this week for December and the fourth quarter last year beat analysts’ estimates, prompting major banks such as Goldman Sachs and Societe Generale to boost their 2023 growth forecasts.

“The rapid reopening has raised hopes of an economic boost, especially on private consumption, but there is transitional pain to be endured at least in the first quarter,” said Mr Bernard Aw, chief economist for Asia-Pacific at credit insurer Coface.

Economists expect growth in the current quarter to soften to 2.5 per cent, down from their previous prediction of 3.1 per cent, before picking up to 6.8 per cent in the April-to-June period.

Mr Aw warned of multiple headwinds still facing the Chinese economy, such as sluggish consumer confidence amid a tight job market and weakening exports.

“There is a risk that, despite the policy measures and reopening, China still might not see the economic boost it expects,” he said.

The median estimate for exports for this year was slashed to minus 3.7 per cent from minus 0.4 per cent, while the outlook for imports was cut to minus 0.1 per cent from 1.3 per cent growth.

Retail sales growth is forecast to accelerate to 7.5 per cent, up from 6.3 per cent previously.

Consumer inflation forecasts were unchanged at 2.3 per cent for 2023 and 2.2 per cent for 2024. BLOOMBERG