Elderly people shop ahead of the Chinese Lunar New Year at an outdoor market on January 13, 2023 in Beijing, China. , Photo Credit: Reuters
China’s economy slowed sharply in the fourth quarter due to tight COVID restrictions, with 2022 growth falling to its worst in nearly half a century and increasing pressure on policymakers to deliver more stimulus this year.
Gross domestic product (GDP) grew 2.9% in October-December from a year earlier, data from the National Bureau of Statistics (NBS) showed on Tuesday, slowing from a third-quarter pace of 3.9%. The rate still exceeded market expectations for a second quarter expansion of 0.4% and a gain of 1.8%.
GDP in the fourth quarter came in at 0.0% on a sequential basis, compared to a growth of 3.9% in July-September.
Beijing abruptly lifted its tough anti-virus measures last month which severely halted economic activities in 2022, but the relaxation also comes with a sharp rise in COVID cases, which economists say could hamper near-term growth.
For 2022, GDP is projected to expand by 3.0%, sorely missing the official target of “around 5.5%” and braking sharply from 8.4% growth in 2021. Barring a 2.2% expansion in 2020 after the initial COVID hit, this is the worst performance since 1976 – the final year of the decade-long Cultural Revolution that ravaged the economy.
Growth is expected to rebound to 4.9% in 2023, as Chinese leaders move to tackle some of the key constraints on growth — a “zero-Covid” policy and a severe slump in the property sector, according to a Reuters poll. Most economists expect growth to pick up from the second quarter.
A speedy recovery is expected
Beijing’s abrupt lifting of Covid restrictions last month prompted analysts to upgrade their economic outlook and a bounce in Chinese financial markets, but businesses struggled with rising infections, suggesting a bumpy recovery in the near term. Is.
Factory output rose 1.3% in December from a year ago, slowing from a 2.2% rise in November, while retail sales, a key gauge of consumption, shrank 1.8% last month, extending November’s 5.9% decline. having had.
Morgan Stanley economists expect further strong growth ahead of the first quarter, which would push 2023 GDP growth to 5.7%.
“We believe the market is still appreciating the far-reaching ramifications of the reopening and the likelihood that a decent cyclical recovery could take place,” he said in a note.
Chinese leaders have pledged to prioritize consumption expansion this year to support domestic demand, at a time when local exporters struggle in the face of risks of a global recession.
At an agenda-setting meeting in December, top leaders pledged to focus on stabilizing the economy in 2023 and increase policy support to ensure key goals are met.
Policy sources said China is likely to target economic growth of at least 5% in 2023 to curb unemployment.
The central bank is expected to continue easing policy this year, pumping in more liquidity and lowering the cost of funds for businesses, while local governments may issue more debt to fund infrastructure projects.