World Bank: China’s economy is expected to grow by 4.3%
BEIJING: The World Bank sharply cut its annual growth forecast for China, warning in a report last week that disruptions from Covid-19 could further slow the recovery of the world’s second-largest economy.
China is the latest major economy to adhere to a zero Covid policy, using rapid lockdowns, mass testing and strict movement restrictions to stamp out outbreaks. But it has tangled supply chains and dragged economic indicators to their lowest levels in about two years.
Growth in China is expected to slow to 4.3% in 2022, the Washington, D.C.-based global financial institution said in a June 8 report, marking a steep drop of 0.8 percentage points from its forecast for december.
This “largely reflects the economic damage caused by Omicron outbreaks and prolonged shutdowns in parts of China from March to May,” he said, referring to the highly transmissible variant of the coronavirus.
During those months, restrictions imposed on dozens of cities, including the manufacturing hubs of Shenzhen and Shanghai, as well as the breadbasket province of Jilin, have hurt business operations and kept consumers at home.
“In the short term, China faces the dual challenge of balancing Covid-19 mitigation with supporting economic growth,” said Martin Raiser, World Bank Country Director for China, Mongolia and Mongolia. Korea.
“The dilemma … is how to make the political stimulus effective, as long as mobility restrictions persist,” he added.
Activity is expected to rebound in the second half of 2022, helped by fiscal stimulus and looser housing rules, according to the lender.
But domestic demand is expected to recover gradually and only partially offset earlier pandemic-related damage, he said.
The adjustment to the World Bank’s forecast comes amid growing concerns that China may miss its official growth target of around 5.5% this year.
Premier Li Keqiang has warned that today’s challenges are in some ways “greater than when the pandemic hit” in March 2020, and the government has put in place a series of measures to try to revive the economy.
The Chinese government has also launched a major infrastructure drive this year, but the World Bank has warned it is on a precarious path.
“There is a danger that China will remain tied to the old playbook of boosting growth through debt-financed infrastructure and real estate investment,” he said on June 8.
“Such a growth model is ultimately unsustainable and the indebtedness of many businesses and local governments is already too high,” he added.
The latest forecast also assumed that China’s zero Covid policy would be “maintained in the short term to avoid stressing its health system”, meaning recurring disruptions are possible.