China growth seen rebounding to 4.9% in 2023, more stimulus on the cards

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COVID-19 outbreak in Shanghai

By Kevin Yao

BEIJING (Reuters) -China’s economic growth is likely to rebound to 4.9% in 2023, before steadying in 2024, a Reuters poll showed, as policymakers pledge to step up support for the COVID-ravaged economy.

Gross domestic product (GDP) likely grew just 2.8% in 2022 as lockdowns weighed on activity and confidence, according to the median forecasts of 49 economists polled by Reuters, slower than a 3.2% rise seen in October’s forecast and braking sharply from 8.4% growth in 2021.

Chinese leaders have pledged to spur the world’s second-largest economy this year while addressing some key drags on growth – the “zero-COVID” policy and a severe property sector downturn.

Strict COVID curbs were abruptly lifted in December, but surging infections are causing some near-term pains.

“We expect economic activities and consumption to rebound strongly from March-April onwards, helped by post-COVID re-opening and release of excess savings,” Tao Wang, chief China economist at UBS, said in a research note.

“The lack of large-scale income- and consumption-stimulus will likely limit the rebound.”

The expected 2022 growth rate would be far below the official target of around of 5.5%. Excluding the 2.2% expansion after the initial COVID hit in 2020, it would also be the worst showing since 1976 – the final year of the decade-long Cultural Revolution that wrecked the economy.

GDP in the fourth quarter of 2022 likely grew 1.8% from a year earlier as anti-virus restrictions intensified, the poll showed, slowing from the third-quarter’s 3.9% pace.

On a quarterly basis, the economy is forecast to contract 0.8% in the fourth quarter, compared with growth of 3.9% in July-September, the poll showed.

The government is due to release 2022 and Q4 GDP data, along with December activity data, on Jan. 17 (0200 GMT).

At an agenda-setting meeting in December, top leaders pledged to focus on stabilising the $17-trillion economy in 2023 and step up policy adjustments to ensure key targets are hit.

China is likely to aim for economic growth of at least 5% in 2023 to keep a lid on unemployment, policy sources said.

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The central bank has promised to make its policy “precise and forceful” this year to support the economy, keeping liquidity reasonably ample and lowering funding costs for businesses.

Analysts expect the central bank to cut the benchmark lending rate – the one-year loan prime rate(LPR) – by 5 basis points (bps) in the first quarter.

On Dec. 20, the central bank kept benchmark lending rates unchanged for the fourth consecutive month, matching the forecasts of most market watchers who nevertheless expect further monetary easing to prop up the slowing economy.

The central bank last cut banks’ reserve requirement ratio by 25 bps effective from Dec. 5, its second such move last year.

“Economic policy would turn more supportive in 2023. We expect 11-12% credit growth in 2023 vs 9.6% in 2022, thanks to the window guidance on banks and the improved credit demand,” Larry Hu, chief China economist at Macquarie, said in a note.

“Fiscal policy could also turn more expansionary with a record quota for local government special bonds.”

Consumer inflation will likely quicken to 2.3% in 2023 from 2.0% in 2022, before steadying in 2024, the poll showed.

(For other stories from the Reuters global long-term economic outlook polls package:)

(Polling by Anant Chandak, Veronica Khongwir and Devayani Sathyan in Bengaluru and Jing Wang in Shanghai; Reporting by Kevin Yao; Editing by Kim Coghill)

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