The World Bank on Tuesday lowered its growth forecast for China for the year as the pandemic and weaknesses in the real estate sector hit the world’s second-largest economy.
In a statement, the institution lowered its forecast to 2.7 percent from 4.3 percent in June. It also revised its forecast for next year to 4.3 percent from 8.1 percent.
Both numbers are well below Beijing’s GDP growth target of about 5.5 percent for the year, a figure many analysts say is unattainable.
“Economic activity in China continues to track the ups and downs of the pandemic — with outbreaks and slowdowns in growth being followed by uneven recoveries,” the World Bank said.
“Real GDP growth is expected to hit 2.7 percent this year before rebounding to 4.3 percent in 2023 as the economy reopens.”
After years of sudden lockdowns, mass testing, lengthy quarantines and travel restrictions, China abruptly abandoned its zero-Covid policy this month.
However, the business disruption has continued as cases rise and some restrictions remain in place.
Health officials have admitted official figures no longer paint the full picture of home infections after mass testing requirements are lifted.
“Continued adjustment of China’s Covid-19 policy will be crucial to both mitigate public health risks and minimize further economic disruption,” said Mara Warwick, World Bank country director for China, Mongolia and Korea .
Last week, the IMF warned that it too was likely to lower its forecasts for China again, blaming a projected further rise in cases.
The fund lowered its growth forecast for China to 3.2 percent in October this year – the lowest level in decades – and expects growth to pick up to 4.4 percent next year.
But “it is very likely that we will downgrade our growth forecasts for China for both 2022 and 2023,” IMF chief Kristalina Georgieva told AFP.
Experts fear China is ill-equipped to deal with the outbreak of infections as it rushes to reopen as millions of vulnerable elderly are still not fully vaccinated.
“Accelerated public health preparedness efforts, including efforts to increase vaccinations, particularly among high-risk groups, could allow for a safer and less disruptive reopening,” Warwick said.
The economy is also under pressure on other fronts.
“Prolonged stress” in the real estate sector – which accounts for about a quarter of annual GDP – could have wider macroeconomic and financial implications, the World Bank noted.
And it added that youth unemployment, climate change-induced risks of extreme weather and the broader global slowdown also threatened growth.
The global economy is being battered by rising interest rates aimed at fighting runaway inflation fueled by Russia’s war in Ukraine, and global supply chain disruptions.
Beijing has attempted to mitigate the sluggish growth with a range of easing measures to provide support, cut interest rates and inject cash into the banking system.
“Directing taxpayers’ money towards social spending and green investment would not only support short-term demand but also contribute to more inclusive and sustainable growth in the medium term,” said Elitza Mileva, the World Bank’s lead economist for China.
© 2022 AFP