BEIJING - China’s abrupt ending of its zero-Covid restrictions have forced economists to make sharp revisions to their growth projections for 2022 and 2023.
UBS Group and Australia & New Zealand Banking Group (ANZ) were the latest to adjust forecasts on Friday, cutting estimates for 2022 to 2.7 per cent as Covid-19 infections spread rapidly.
Predictions for 2023 were raised sharply to close to 5 per cent or higher, on the expectation that consumer and business activity will recover as Covid-19 infections subside.
Latest economic data show China’s economy weakened more than expected in November before the government abruptly dropped its zero-Covid policy. A rebound in economic activity since the shift is proving to be short-lived, as infections spread in major cities and residents choose to avoid going out.
UBS now sees gross domestic product (GDP) growing 2.7 per cent in 2022, down from 3.1 per cent previously. Growth will likely rebound to 4.9 per cent in 2023, up from a previous projection of 4.5 per cent, UBS economists led by Ms Wang Tao wrote in a note.
ANZ cut its prediction for 2022 to 2.7 per cent from 3 per cent, having already raised 2023’s estimate to 5.4 per cent in November.
“People may be very cautious in their offline activities and voluntarily reduce their outings and gatherings,” UBS economists said. “We expect economic activities to gradually recover from early 2023 as the first big wave of Covid-19 infection passes.”
Other major banks like Goldman Sachs have also adjusted their growth expectations for 2022 and 2023 given China’s abrupt shift in Covid-19 policy. The consensus estimate in a Bloomberg survey is for the economy to expand 4.8 per cent in 2023 from 3.2 per cent in 2022.
China’s top leaders are expected to conclude an annual economic policy meeting soon, which will offer clues on the government’s stance on growth and stimulus in 2023. Senior officials are debating a GDP growth target for 2023 of around 5 per cent, according to people familiar with the discussions. BLOOMBERG
