HONG KONG (BLOOMBERG) - A slew of economists have cut their forecasts for China's full-year economic growth in recent days after the country reported worse-than-expected data for April while still signalling that its tough Covid-19 curbs are not going anywhere.
Standard Chartered and Bloomberg Economics downgraded their estimates for 2022 on Thursday (May 19), after Goldman Sachs and Citigroup did so earlier in the week.
Stringent Covid-19 controls weighed heavily on activity in April and early May, disrupting production and consumption, the StanChart economists wrote. They cut their full-year growth forecast to 4.1 per cent year on year from 5 per cent, and also lowered their second-quarter growth estimate to 0.3 per cent from 3.5 per cent.
Recent improvements in China's Covid-19 situation, along with continued policy support, should facilitate a recovery in the second half, they added. But the economists also estimated that "every additional month of severe lockdowns would trim annual growth" by as much as 0.6 percentage point.
The downgrade by Bloomberg Economics was even more severe: Economists now forecast growth of just 2 per cent this year, down from 3.6 per cent.
"Stimulus is failing to get much traction due to the restrictions on activity. The government and People's Bank of China have room to step up support - and we expect them to deliver," economists Chang Shu and Eric Zhu wrote in a report. "But even in an upside scenario, with an unlikely relaxation of the zero-Covid-19 stance, a 5 per cent expansion - let alone the government's 5.5 per cent target - looks out of reach."
The Bloomberg economists project a contraction of 2.7 per cent in the second quarter, down from a previous estimate of 1.5 per cent growth.
Beijing's growth target is looking harder to hit as Covid-19 outbreaks and lockdowns hit economic activity. The authorities have ramped up calls for support in recent weeks, with Chinese Premier Li Keqiang telling local governments on Wednesday to "act decisively" in an effort to bring the economy back on track as soon as possible.
Also on Wednesday, Goldman Sachs economists cut their 2022 economic growth forecast for China to 4 per cent from 4.5 per cent, citing the government's doubling down on zero Covid-19.
And Citi economists on Tuesday downgraded their gross domestic product forecast to 4.2 per cent from 5.1 per cent, saying that the impact of Covid-19 lockdowns on economic activity looks set to extend into June and beyond.